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THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


M.C 


^>^ 


THE  LAW 


OF 


UNINCORPORATED 
ASSOCIATIONS 

AND  SIMILAR  RELATIONS 


BY     , 

SYDNEY  R.  WRIGHTINGTON 

r,  \ 

OF    THE    BOSTON   BAR 


BOSTON 

LITTLE,  BROWN,  AND   COMPANY 

1916 


Copyright,  1916, 
By  S.  R.  Wrightington. 


All  rights  reserved. 


THE   UNtVERSITT   PUESS,    CAMHUIDGE,    V.  S.  A. 


PREFACE 

The  development  of  the  law  of  corporations  was  the 
overshadowing  feature  of  legal  history  in  this  country 
in  the  last  quarter  of  the  nineteenth  century.  It  was 
accompanied  by  an  unreasoning  public  hostility  to 
corporations  which  bore  fruit  in  the  imposition  of 
taxes  and  regulations  by  Legislatures  which  in  many 
cases  have  seriously  impaired  the  efficiency  of  this 
form  of  organization  for  cooperative  business  enter- 
prise. One  of  the  most  striking  features  of  the  recent 
decisions  of  the  Courts  is  the  evidence  that  business 
men  are  reverting  to  unincorporated  associations  to 
carry  out  their  purposes.  Owing  to  peculiar  local 
restrictions  on  corporations  these  associations  have 
been  more  largely  used  and  more  highly  developed  in 
Massachusetts  than  elsewhere.  To  them  the  lawyers 
of  other  states  are  now  turning  for  relief.  These  asso- 
ciations are  organized  under  the  terms  of  elaborate 
trust  deeds  and  resemble  closely  the  important  fea- 
tures of  corporations.  The  law  on  many  of  the  most 
important  questions  raised  by  these  instruments  is 
still  in  the  making.  Some  attempt  at  classification 
seems  urgently  needed  if  only  as  a  basis  for  criticism 
and  future  development. 

Underwriting  syndicates  are  another  kind  of  unin- 
corporated cooperative  organization  dealing  with  finan- 
cial operations  of  vast  importance.  Among  other  asso- 
ciations not  organized  for  profit,  especial  interest 
today  attaches  to  stock  exchanges,  trade  unions  and 

iii 


66V7G2 


PREFACE 

religious  associations.  In  view  of  the  interest  aroused 
in  these  subjects  it  has  seemed  desirable  to  prepare  a 
text  book  covering  the  entire  field  of  unincorporated 
associations. 

No  comprehensive  classification  of  the  whole  sub- 
ject has  been  made  in  recent  years.  Some  aspects  of 
it  have  been  touched  upon  in  treatises  upon  other 
subjects.  Indeed  it  is  surprising  under  how  many 
unfamiliar  titles  the  authorities  have  been  concealed 
in  the  digests  and  encyclopaedias.  Though  the  law  of 
associations  has  in  recent  years  proved  an  alluring  field 
for  speculation  by  authorities  upon  jurisprudence,  this 
book  is  intended  primarily  for  the  convenience  of  the 
practitioner.  For  that  reason  the  familiar  part  of  the 
law  has  been  condensed  and  the  citations  distinguished 
by  indicating  some  striking  characteristic  in  the  facts 
of  each.  Brief  abstracts  of  the  others  are  given  in  the 
notes.  In  an  appendix  are  printed  forms  consisting 
mainly  of  the  deeds  of  trust  of  business  organizations 
that  have  been  considered  in  the  important  recent  de- 
cisions or  have  been  used  in  practice.  It  is  hoped  that 
these  will  prove  suggestive  to  attorneys  desiring  to 
prepare  such  papers. 

The  author  desires  to  acknowledge  his  indebted- 
ness to  John  L.  Thorndike,  Esq.,  of  the  Boston  Bar,  for 
important  suggestions. 

S.  R.  Wrightington. 

Boston,  Mass.,  Oct.  20,  1915. 


IV 


CONTENTS 

CHAPTER  I 

INTRODUCTION 

SEC.  PAGE 

1.  Definition 1 

2.  Classification 4 

3.  Law  Applicable 5 

4.  Modern  Tendencies 7 

CHAPTER   II 

ASSOCIATIONS   FOR   PROFIT 

5.  Early  Companies 8 

6.  Informal  Associations  for  Profit 8 

7.  Mining  Partnerships 10 

8.  Syndicates 11 

9.  Statutory  Joint  Stock  Associations 12 

10.  Defective  Incorporations 26 

11.  Formal  Associations  for  Profit 28 

12.  The  Law  Applicable  to  Informal  Associations  for  Profit     .    .  36 

13.  The  Law  Apphcable  to  Formal  Associations  for  Profit    ...  39 

14.  The  Distinction  between  Partnerships  and  Trusts 40 

15.  Declaration  of  Intention 62 

16.  Unincorporated  Companies  under  the  Bankruptcy  Act  ...  62 

17.  Associations    for    Profit    Distinguished    from    Tenancies   in 

Common 66 

18.  Holding  Companies 73 

19.  Application  of  Law  of  Partnership  to  Associations  for  Profit  .  76 

20.  Membership  in  Informal  Associations  for  Profit 77 

21.  Property  Rights  in  Associations  for  Profit 78 

22.  Powers  of  Members  of  Associations  for  Profit 88 

23.  Pleading  of  Informal  Associations  for  Profit 94 

24.  Rights  and  Liabilities  of  Shareholders 98 

25.  Termination  of  Liability 107 

26.  Dissolution  by  Transfer Ill 

27.  Dissolution  by  Death 118 

28.  Winding  up  Informal  Associations  for  Profit 120 

29.  Limitation  of  Liabihty  of  Shareholders 123 

30.  Effect  of  Notice 125 

31.  Express  Stipulation  in  Contracts  with  Third  Parties  ....  129 

32.  Remedies  of  Creditors 132 

V 


CONTENTS 

SEC.  PAGE 

33.  Trustees  of  Associations  for  Profit 133 

34.  Propriety  of  Investments  by  Trustees  in  Shares  in  Associations 

for  Profits 138 

35.  Governmental  Control  over  Associations  for  Profit     ....  139 

36.  The  Uniform  Partnership  Act      144 

CHAPTER   III 

TKUSTS 

37.  In  General 149 

38.  Trusts  for  Creditors 151 

39.  Car  Trusts 152 

40.  Trusts  for  Bondholders      153 

41.  Voting  Trusts      154 

42.  Combinations 154 

43.  Rights  of  Creditors 155 

44.  Mutual  Obligations  of  Trustee  and  Beneficiary 160 

45.  Representation  of  Beneficiaries  by  the  Trustee 164 

46.  Management  of  Trust  Estate 167 

47.  Change  of  Trustee      169 


CHAPTER   IV 

UNASSOCIATED    GROUPS 

48.  In  General 171 

49.  Lloyd's  Insiu-ance 171 

50.  Underwriters  of  Securities 182 

51.  Unsuccessful  Incorporators 191 

52.  Tenants  in  Common 192 

53.  Common  Agents 197 

CHAPTER  V 

NON-PROFIT   ASSOCIATIONS 

54.  Definition 199 

55.  Admission  of  Members      208 

56.  Expulsion  of  Members       213 

57.  lOxhaustion  of  Remedies  within  the  Association 224 

58.  Internal  Affairs 227 

59.  "Ultra  Vires"      238 

60.  Property 239 

61.  Property  of  ReUgious  Associations      254 

62.  Du(-H 269 

(hi.  Mutual  Obligations  of  Members      273 

64.  Liability  of  Mcrnbens 275 

65.  ]>iability  of  Mcmbctrs  of  Associations  of  Employers  and  of 

ErnployecH     .  , 285 

66.  Kight.sof  Creditors  to  Reach  the  Funds  of  the  ABSociation  .    .  293 

67.  Powers  of  Ofliccrs 296 

vi 


CONTENTS 

SEC.  PAGE 

68.  Liability  of  Officers  and  Agents 298 

69.  Dissolution       301 

70.  Parties  in  Litigation 307 

APPENDIX  OF  FORMS 315 

INDEX 471 


Vll 


TABLE   OF   CASES 


PAGE 

Abbott  V.  Cobb  300 

Abel  V.  Love  70 

Abels  V.  McKeen  238,  306 

Abernathie  v.  Virginia  Co.  92 

Abington  Co.  «;.  Reynolds  21 

Adams  Express  Co.  v.  Scho- 

field  2,  15 

Addam's  Appeal  135 

Ahlendorf  v.  Barkons  250 

AieUo  V.  Montecalfo  245 

Aikens  v.  Wisconsin  286 

Albert  Life  Assurance  Co.  132,  133 

Alchenburger  v.  Lodge       245,  250 

Alexander  v.  Bowers  227 

V.  Ellison  197 

Alleghany  Banks  v.  BaUey  21 

AUen  V.  Clark  17,  312 

V.  Duffie  270 

V.  Harper  194 

V.  Long  121 

V.  Roby  227 

Aluminum  Co.  z).  Local  No.  84  290 

Alvord  V.  Smith  40,  109 

Amal.  Soc.  v.  Osborne  238 

American  Co.  v.  Converse  133,  155 

V.  Kentucky  Co.  167 

American,  etc.  Ass'n  v.  Ln- 

porters'  Ass'n  95 

American,  etc.  Co.    v.  Wire 

Drawers,  etc.  Union       308,  310 
Am.  Fed.  of  Labor  v.  Buck's 

Stove  Co.  290 

American  Lucol  Co.  v.  Blan- 

chard  180 

V.  Lowe  180 

Amish  V.  Gelhaus  241 

Anaconda  Co.  v.  Butte  Co.  69 

Andrew's    and    Alexander's 

Case  202 

Andrews  v.  Brace  25 

V.  Wilson  170 

Andrews  Bros.  Co.  t^.  Youngs- 
town  Coke  Co.  22 
Annie  H.  Smith,  The                  197 
Anthony  v.  Campbell                  167 
A.  O.  U.  W.  V.  A.  O.  U.  W.     251, 

305 


PAGE 

Apollo,  The  197 

Apostolic  Union  v.  Kundson       249 

App  V.  Lutheran  259 

Appeal  of  Baylor  313 

Fisher  23 

Gebhart  21 

Gumbert  306 

Hedge  77 

Landis  262 

Moss  123 

April  V.  Baird  313 

Arkins    v.     Dominion    Live 

Stock  Association  276 

Arnold  v.  Conklin  27 

V.  Searing  135 

Arts  V.  Guthrie  307 

Ash  V.  Guie  201,  276 

Ashley  v.  Dowhng  8,  37,  118 

V.  Henderson  301 

Ashuelot  R.  R.  v.  Elliott  160 

Associated  Trust,  The,  Re      2,  39, 

48,  62 

Athenaeum    Life    Assiu-ance 

Society  131 

Attorney  General  v.  Clark        312 

V.  Dublin  245 

V.  Federal  St.  28,  209,  239,  240, 

246,  258,  263 

V.  Geerlings  233 

V.  McVickie  24 

V.  Mercantile  Co.  13 

Augusta     Club     v.     Cotton 

States,  etc.  Fair  Ass'n  276 

Auracher  v.  Yerger  229 

Austin  V.  Searing  233 

V.  Shaw  243,  244 

Austrahan  Co.  v.  Mounsey       136 
Avery  v.  Baker  241 


Babb  V.  Reed 

37 

Bacliman  v.  Harrington 

222 

V.  Hofman 

235 

Bacon  v.  Brotherhood 

249 

V.  Dinsmore 

13 

Bailey  v.  Macauley 

301 

Bain  v.  Loan  Ass'n 

98 

Baird  v.  Wells           215, 

222,  223 

TABLE   OF   CASES 


PAGE 

Baker  v.  Nachtrieb  253 

Ballou  V.  Famum  157 

V.  Wood                        193,  194 
Baltimore  Trust  Co.  v.  Ham- 

bleton  94 

Band  v.  Infantry  299 
Bank  of  Topeka  v.  Eaton  125,  127 
Bank  of  Toronto  v.  Manf.  & 

Merch.  Fire  Ass'n  179 

Baptist  Church  v.  Witherell  245 

Bar  Co.  V.  Zimmerman  97 

Barbaud  v.  Hook  ham  275 

Barbour  v.  Weld  169 

Barker  v.  Barker  48 

V.  ^^^^ite  133 

V.  Wood  246 

Barkley  v.  Hayes  265 

Barnard  v.  WTiipple  246 

Barndollar  v.  Du  Bois        109,  123 

Barnes  v.  Berry  282 

V.  Boardman  196 

V.  People  175 

Barnes  Co.  v.  Chicago  Union  307 

Barnett  v.  Lambert  27,  301 

Barney  v.  Chittendon  168 

V.  Leach  197 

V.  Saunders  164 

Barr  v.  Essex  Trades  Council  290 

Barrell  v.  Joy  164 

Barry  v.  Nuckolls  278 

Bartholomae  v.  Kaufifman  298 

Bartlett  v.  Bartlett  218 

V.  Boyles  92,  122 

V.  Gill  87 

V.  King  247 

Barton  v.  Fitzpatrick  236 

Barzilay  v.  Loewenthal  282 

Bascom  v.  Lane  268 

Base  Ball  Ass'n  v.  Club  2 

Bastrop    and    Austin    Rice 

Growers'  Ass'n  v.  Lochran  295 

Bates  V.  Huston  234 

Batty  V.  Adams  County  82 

Bauer  v.  Samson  Lodge  226 

V.  Seegar  232 
Beaman  v.  Whitney        77,  88,  109 

lioan  V.  American  L.  &  T.  Co.  162 

Bear  v.  Heasly  265 

Beaty  v.  Bordwell  197 

Beatty  v.  Kurtz  309 

Beaumont  v.  Meredith  302 

Iicav(!r'H  Adrn.  v.  McGrath  131 

Beck  V.  Railway  Teamsters  290 

Becchcr  v.  HuHh  62 
Bellows   Fall.s   Paper  Co.  v. 

Commonwealth  83 

Belton  V.  Hatch  210 

Ben  Co.  v.  Zimmerman  2(i 


PAGE 

Bennett  v.  Keama 

274 

V.  Latlu-op 

98 

V.  Morgan 

261 

Bentle  v.  Ulay 

265 

Bentley  v.  Brossard 

69 

Berg  V.  Unterstutzungs  Verein  272 
Berkeley  v.  Green  164 

Bernard  Co.  v.  Packard  22 

Berry  v.  Cross  121 

V.  Donovan  288 

Berry  Bros.  v.  Hooper's  Est.  24 
Berryman  v.  Reese  306 

Bestor  v.  Barker  94 

Betts  V.  Betts  247 

Bible  Soc.  v.  Pendleton  247 

Biggert  v.  Hicks  179 

Bilhngton  v.  Gauthier  Co.  19 

Bingaman  v.  Hickman  164 

Birmingham  v.  Gallagher  309 

Bisbee  v.  MacKay  81,  135 

Bishop  V.  Bishop  15 

Bissell  V.  Foss  116 

Black  V.  Wiedersheim  161 

Blackmarr  v.  WiUiamson  121 

Black  Rabbit  Ass'n  v.  Munday  245 
Blair    v.    National    Shirt    & 

Overalls  Co.  180 

Blakely  v.  Bennecke  299 

Blanchard  v.  Newark  Council  224 
Blatchford  v.  Ross  18 

Bloets  V.  Simon  309,  312 

Bochme  v.  Fitzgerald  103 

Bodey  v.  Cooper  25 

Bodwell  V.  Eastman  15,  125 

Bogardus  v.  Reed  68 

Bohn  Mfg.  Co.  v.  Hollis  290 

Bonacum  v.  Harrington  229 

Bonham  v.  Harris  265 

Boody  V.  Drew  11,  134 

Booth  V.  Dodge  134 

Bose  V.  Christ  259 

Bossert  v.  Dhuy  288,  307 

V.  United  Brotherhood  220, 
288 
Bottom  V.  Tinsley  235 

Boucher  v.  Mulverhill  69 

Bouldin  v.  Alexander  214,  234, 
260,  251,  262 
Boutwell  V.  Marr  289,  291 

Bowen  v.  Matheson  289 

Boyd  V.  Merriell  104 

Boyer  v.  Nesbitt  154 

Boylan  v.  Fay  160 

Uoylcs  1).  Roberts  265 

liiiulfonl  V.  National  Benefit 

Ass'n  107 

Bradley  v.  Harkness  70 

V.  Pierson  289 


TABLE  OF  CASES 


Bradley  Fish  Co.  v.  Dudley        88 
Brady  v.  Mattern  141 

Branagan  v.  Buckxnan      202,  211, 

237 
Brandon  v.  Worley  298,  314 

Branson  v.  I.  W.  W.  288,  310 

Bray  v.  Farwell  17 

Brennan  v.  United  Hatters        219 
Brewster  v.  McCall  246 

Briar  Hill  Co.  v.  Atlas  Works       19 
Bridenkeker  v.  Hoard  311 

Brightman  v.  Bates  154 

Bristor  v.  Burr  236 

British    Red    Cross    Soc.    v. 

Johnson  306 

Broadway  Nat.  Bank  v.  Wood  159 

Brooke  v.  Schaklets  269 

Brooks  V.  Dinsmore  13 

Brower  v.  Crimmins  297 

Brown  v.  Clark  265 

V.  Dale  304 

V.  Lewis  295 

V.  Lutheran  269 

V.  Moore  258 

V.  Parker  170 

V.  Stoerkel  202,  249 

Brown's  Estate  151 

Broyles  v.  McCoy  99 

Brundage  v.  Deardorf         264,  265 

Bryant  v.  Goodnow  104 

Bryson  v.  Wood  169 

Buck  V.  Spofford  67 

Bullard  v.  Attorney  General      168 

V.  Kinney  103 

Burganv.  Lyell  91,  110 

Burgett  V.  TaUafero  196 

Burke  v.  Rhoads  181 

V.  Roper      201,  215,  302,  303, 

306 

Burle  V.  Smith  301 

Burm ester  v.  Norris  136 

Burnetta  v.  Marceline  Co.        282 

Burnham  v.  Dowd  288 

Burr  V.  Smith  248 

Burrows  v.  Holt  243 

Burt  V.  Grand  Lodge  223 

V.  Lothrop  44,  281 

V.  Oneida  Community         254 

Burton  v.  Grand  Rapids  Co.      277 

Burwell  v.  Mandeville's  Exec.    150 

Busby  V.  Mitchell  241 

Busch  V.  Stromberg  Co.  190 

Bushong  V.  Taylor  294 

Butterfield  v.  Beardsley  80 

Byam  v.  Bickford  88,  246 

Bybee  v.  Hawkett  188 

Byington  v.  Piazza  161 

Byrne  v.  B.  U.  222 


Cahill  V.  Bigger 
Cain  V.  Armenia  Lodge 
Caldicott  V.  Griffiths 
Callsen  v.  Hope 
Calvert  v.  Aldrich 


PAGE 

261 

307 
298 
309 
197 


Camden,  etc.  R.  Co.  v.  Penn- 
sylvania Guarantors         96,  98, 
110 
Cameron  v.  First  Bank  123 

Campbell  v.  Johnson  224 

V.  R.  R.  160 

Cantrill    Telephone    Co.    v. 

Fisher  211 

Cape  V.  Plymouth  Church         259 
V.  Plymouth  Church  264 

Carlen  v.  Drury  106 

Carne  v.  Long  33 

Carothers  v.  Moseley  265 

Cai-penter     v.     Westchester 

County  Historical  Soc.  247 

Carrick  v.  Conevin  295 

Carrier  v.  Price  33 

Carskadon  v.  Torreyson  248 

Carter  v.  McClure  115,  119 

V.  Producers  Co.  23 

V.  Producers  Oil  Co.  19 

Castner  v.  Rinne  297 

Cater  v.  Everleigh  160 

Central  Bank  v.  Sheldon  26 

Cercle  Frangais  v.  French         213 
Chamberlain  v.  Lincoln  224 

Chambers  v.  Calhoun  270 

Chancey  v.  May  95 

Chapin  v.  First  Universalist 

Society  133,  134 

Chapman  v.  Barney  2,  16 

Charles  v.  Eshleman  68 

Chase  V.  Cheney  229 

V.  Ladd  168 

V.  Prendergast  200 

Cheatham  v.  Rowland        164,  165 

Cheney  v.  Clark  274,  300 

V.  Goodwin  270,  274,  280 

V.  Ketcham  214 

Chick  y.  Trevatt  299 

Chickering,  Re  166 

Childers  v.  Neely  70 

ChiU  Soc.  V.  Bowen  247 

Chippendale,  Ex  parte  136 

Chi-istian  Church  v.  Church 

of  Christ  244 

Church  V.  Chfton  307 

V.  OdeU  195 

V.  Wells  246 

Cincinnati   Co.    v.   Citizens' 

Bank  39,  108 

Citizens'    Bank   v.   Bank  of 
Commerce  87 


TABLE   OF   CASES 


Citizens'  Bank  v.  Los  Angeles 

Co.  166 

V.  Vaughan  24 

Claflin  Co.  v.  Middlesex  Co.  170 
Clagett  V.  Kilbourne               71,  79 

Clancy  v.  Terhune  312 

Clark  V.  O'Rourke  299 

V.  Reed  124 

Clayton's  Case  306 

Cleland  v.  Anderson  307 
Clerk's  Inv.  Co.  v.  Sydnor 

121  122 
Clery  v.  Brown                          '  220 

Clough  V.  RatcUffe  273 

Cock  V.  Bailey  20 

Cockburn  v.  Thompson  95 

CockereU  v.  Aucompte  280 

Coe  V.  N.  J.  R.  R.  Co.  165 

Cogswell  V.  BuUock  231 

Cohen  v.  Gwynn  108 

Cohn  V.  Borst  312 

Coit  V.  Tracy  136 

Colburn  v.  Grant  162 

Coleman  v.  Coleman  94 

V.  Connolly  167 

Coleman's  Estate  164 

Colley  V.  Wilson  311 

Colton  V.  Raymond  18 

Comes  V.  Clark  155 

Comfort  V.  Graham  298 
Commonwealth     v.     Adams 

Express  Co.  15 
V.  Green  230 
V.  Hunt  286 
V.  Pomphret                 212,  213 
V.  Reinoehl  176 
V.  Rosen  132 
V.  Union  Co.  163 
V.  Union  League  of  Phil- 
adelphia 216 
V.  Vrooman  177 
Compton  V.  Beccher  178 
Compton's  Will,  Re  247 
Conant  v.  Jones  178 
Confcr(!nce  v.  Allen  234 
Congregational  Soc.  v.  Swan  270 
Congregational  Unitarian  Soc. 

V.  Halo  248 

Connell  v.  Stalker  224 

V.  United  Hatters  295 

Connett  v.  Rciformed  Church  230 

Connolly    v.    Masonic    Mat. 

\U'j\.  A.ss'n  219 

CoiiovcT  V.  Karl  194 
Con.solifjatr^d    Water   Co.    /;. 

San  Diego  165 
Continental  Ins.  Co.  v.  iioard 

of  Fin-  Underwriters  289 


PAGE 

Continental    Nat.    Bank    v. 

Heihnan  11,  88 

Conway  v.  Zender  103,  309 

Cook  V.  Gray  125 

CooUdge  V.  Taylor  77 

Coombs  V.  Harford  298,  312 

Cooper  V.  Lankford  151 
Cornfield     v.     Order     Brith 

Abraham  202,  312 

Corning  v.  Greene  313 

Corregan  v.  Hay  226 

Cortes  Co.  v.  Tannhauser  94 

Cote  V.  Murphy  287 

Cotton  Ass'n  v.  Taylor  217 

Cox  V.  B9dfish  39,  108 

V.  Hickman  57,  152 

V.  Watts  Co.  21 

Coyne  v.  Caples  197 
Craig  t^.  Inhabitants  of  Frank- 

Un  County  245 

Crawford  v.  Cross  123 

V.  Nies  243 

Crawley    v.     Am.     Soc.  of 

Equity  299 

Crimm's  Appeal  106 

Crittenden  v.  Armour  183 

Cross  V.  Jackson  104 

V.  WilUams  300 

Crow  V.  Capital  City  215,  217, 

219 

Crowther  v.  Thorley  45 

Cruse  V.  Jones  299 

Cucurillo  V.  Societa  224 

Cuff  V.  Heine  181 

CuUen  V.  Queensbury  299 

Cunniff  V.  Jamovu-  271 

V.  McDonnell  163,  164 

Curran  v.  Galen  289 

Currie,  Re  210 

Curry  v.  Dorr  157 

Curtis  V.  Leavitt  165 

Curtiss  V.  Hoyt  249 

Gushing  V.  Breed  193 

Cutbush  V.  Cutbush  155 

Cutler  V.  Thomas  99 

Dady  v.  Georgia  161 

Dahl  V.  Palache  235 

Dailey  v.  Fitzgerald  118 

Danl^ury    Cornet    Band  v. 

Bean  124 

Daiiforth  v.  Allen       121,  125,  127 

Dani(>ls  v.  Hart  157 

Daniher  v.  Grand  Lodge  231 

Darby  v.  Darby  79 

Davidson  v.  Holden  276 

V.  Knox  312 

Davies  v.  Hawkins  93 


Xll 


TABLE   OF   CASES 

PAGE 

128 
295 
166 
9,  27 
215,  238 
215 
166 
234 
118 


Davis  V.  Beverly 
V.  Bradford 
V.  Hemingway 
Davison  v.  Holden 
Dawkins  v.  Antrobus 
Dawson  v.  He  well 
Day  V.  Wetherby 
Deaderick  v.  Lampson 
Decker  v.  Howell 
Deckert  v.  Chesapeake,  etc. 

Co.  25 

Delauney  v.  Strickland  276 

Dellapiazza  v.  Foley  110 

Denne  v.  Judge  194 

Dennis  v.  Kennedy  137 

Derry  v.  G.  H.  L.  M.  M.  218 

Determann  v.  Luehrsmann  309 
Detroit   Schuetzen   Band   v. 

Detroit  Agitations  Verein  307 

Develle  v.  Plummer  311 
Devoss  V.  Gray  276,  278 
Dickerman  v.  Northern  Trust 

Co.  166 

Dickinson  v.  Mathewson  Co.  24 

V.  Valpy  90 
Dieffendorf      i'.      Reformed 

Church  229 
Diggs  V.  Fidelity  Co.  168 
Dillworth  v.  Ackley  80 
Dingwall  v.  Assoc.  217,  220 
Dochkus  V.  Lithuanian  Soc.  314 
Dodd  V.  Armstrong  219 
Dodge  V.  Talleys  165 
Dolan  V.  Court  Good  Samari- 
tan 226 
Donald  v.  Guy  99 
Donaldson  v.  Allen  167 
Donnell  v.  Herring  Co.  1 
D'Ooge  V.  Leeds  15 
Doubleday  v.  Muskett  26 
Douchitt  V.  Stinson  244 
Dougherty  v.  Creary  92 
Douglas  V.  Merceles  123 
Dow  V.  Moore  88,  98 
Downer  v.  Smith  195 
Downes  v.  Bennett  289 
Downing  v.  Mann  279 
V.  Marshall  248 
Dowse  V.  Gorton  159 
V.  Gorton  160 
Doyle  V.  Burke  223 
V.  Burns  69 
V.  Reid  242 
Draper  v.  Man  vers  301 
Drew  V.  Hogan  310 
Dubs  V.  Egli  244 
Duckworth  v.  Ocean  Co.  168 
Dudley  v.  Piatt  97 


Duessel  v.  Proch 

PAGE 

234 

Duke  V.  Fuller 

305 

Dunham  v.  Blood 

159 

Durel   V.    Perseverance   Fire 

Co. 

217 

Durham  Co.  v.  Clute 

28 

Durkee  v.  People 

153 

Duryea  v.  Burt 

87 

Dutton,  In  re 

33 

Dwenger  v.  Geary 

246 

Dyer  v.  Riley 

162 

Eagle  V.  Bucher  94 

Earle  v.  Wood  237,  240,  266 

East     Haddam     Church     v. 

East  Haddam  Soc.  239,  244 

Ebbinghousen  v.  Worth  Club  293 
Edenborn  v.  Sim  185 

Edge  worth  v.  Wood  15 

Edlinger  v.  Southern  Oil  Co.  93 
Edmunds,  Ex  -parte  159 

Edwards  v.  Old  Settlers  Ass'n       82 
V.  Warren,  etc.  Works  16 

Egan  V.  Bonacum  309 

Ehrenfeld's  Appeal  234 

Ehrlich  v.  Willenski  276 

Ehrmann traut  v.  Robinson  278 
Eichbaum  v.  Irons  276,  279 

Eis  V.  Croze  243 

Ehas  V.  Schweiger  169 

EUot  V.  Freeman  139 

V.  Hinrod  19 

Elkington  v.  London  Ass'n  295 
Ellison  V.  Bignold  107 

Elwell  V.  Tatum  281 

Ely  V.  Ely  247 

Emonds  v.  Termehr  300 

Engel  V.  Walsh  216,  224 

Engine  Co.  v.  C.  221 

English  V.  Wall  98 

English,  etc.  Assurance  Society  132 
Engvall  w.  Buchie  111,  132 

Enterprise  Co.  v.  Mundy  179,  181 
Equitable  Co.  v.  Fisher  169,  170 
Erdman  v.  Mitchell  288 

Ervin  v.  Masterson  70 

Estabrook  v.  Woods  47 

Estate  of  Ahl  169 

EttUnger  v.  Persian  Co.  167 

Evans,  Re  155,  159 

Evans  v.  Hooper  97 

V.  Lilly  299 

V.  Philadelphia  Club  215 

Evenson  v.  Spaulding  310 

Everett  v.  Drew  157 

V.  Duss  253 

V.  First  Presbyterian 

Church  238,  242 


TABLE   OF   CASES 


Ewing  V.  Medlock 
Exmouth,  Ex  parte 
Express  Co.  v.  State 


311 
34 
15 


Fair  v.  First  Church  234 

Fairbanks  v.  McDonald  287 

Fairchild  v.  Adams  275 

Fallardeau  v.  Boston  Ass'n  157 
Fall   River   WTialing   Co.    v. 

Borden  66,  67 

Falmouth  Bank  v.  Cape  Cod 

Co.  167 

Fareira's  Appeal  107 

Fargo  V.  L.  N.  A.,  etc.  Co.  14 

V.  McVicar  14 

Far j eon  v.  Fogg  179 
Farmer  v.  Kansas  City  Board 

of  Trade  216 

Farmers'  Co.  v.  Chicago    169,  170 

V.  Hughes  169 

V.  Jones  26,  29 

V.  Lake  Street  Ry.  Co.  153 

Famham  v.  Patch  110 

Farnsworth  v.  Storrs  275 

Farrand  v.  Gleason  197 

FarreU  v.  DalzeU  304 

Faure  Electric  Accumulator 

Co.,  In  re  45 

Fay  V.  Noble                          26,  191 

Feiner  v.  Reiss  237 
Feizil  V.  Trustees  of  German 

IM.  E.  Society  258 

Fells  V.  Read  242 

Fenwick  v.  Lay  cock  155 

Fereday  v.  Wightwick  116 

Ferguson  v.  Bateman  134 

Fernstler  v.  Siebert  261 

Ferraria  v.  Vasconcellos  263 

Ferris  v.  Thaw                     201,  276 
Fetner  v.  American  National 

Bank  207 
FideUty  Co.  v.  Shenandoah 

Co.  165 

Field  V.  Field  237 

Fink  V.  Bay  Shore  Co.  166 

V.  Umshied  241 

Finlov  V.  Brent  258 

FirstBank  v.  G.  B.  V.  Co.  69 

V.  Rector  276 

V.  Shodd  166 

First  Church  v.  Cumberland 

Church  265 
V.  First  Church  265 
V.  \hi^)^'T  201 
First  National  Bank  v.  .Mniy  27 
First  National  iiunk  of  Ot- 
tawa V.  Converse  102 
First  Nat.  Co.  v.  HaUsbury  166 


First    Presbyterian    Church 

V.  Wilson  227,  264 

First    Presbyterian    Soc.  v. 

Bass  246 

Fischer  v.  Reab  302 

Fisher  v.  Keane  221,  223 

Fiske  V.  Eldridge  155 

Fitzpatrick  v.  Rutter  310 

Fleming  v.  Hector  276,  280 

V.  Lay  99 

Fletcher  v.  Rutland  Co.  169 

V.  Tribe  293 

Fobes  V.  Shattuck  197 

Foreman  v.  Fayerson  234 

Fort  V.  State  174 

Forward  v.  Allen  164 

Fox  V.  Narramore  276 

Francis  v.  Harrison  165 

V.  Perry                211,  238,  313 

V.  Taylor  14 

Frank  v.  Drenkhahn  28 

Frankhn  v.  Burnham  219,  232 

Fredenhall  v.  Taylor  298 
Free  Church  of  Scotland  v. 

Overtown  267 

Freedman's  Co.  v.  Earle  82 

Freeman  v.  Hemenway  118 

French  v.  Barre  243 

V.  Price  67,  192 

V.  Styring  67 

Frith,  Re  157 

Fritz  V.  Knaub  225 

V.  Muck  17,  103,  220,  221 

Froehch  v.  Benefit  Ass'n  220 

Frost  V.  Thompson     49,  158,  316, 

317 

V.  Walker  77,  98 

Frothingham  v.  Barney  18 

Fry,  Re  94 

Fuchs  V.  Meisel  261 

Fugure    v.     Burlington  St. 

Joseph's  Mut.  Soc.  272 
Fullhright  v.  Higginbotham       225 

Fuller  V.  Rowe  26,  109 

Furniture  Co.  v.  Union  307 

Fussell  V.  HaU  228 


Gaines  v.  Farmer 
Galveston  City  Co.  v.  Scott 


233 
78, 
106 

Gardiner  v.  Gardiner  81,  138 

Garland,  Ex  parte  150,  155 

Garrand  v.  Hartley  103 

Gartin  v.  Pennick  262 

Gaselys  v.  Sepaj'atist  Soc.  253 

Gass  v.  Wilhite  253 

Galzow  V.  Huening  289,  291 

Gearing  v.  Carroll  20 


XIV 


TABLE   OF   CASES 


Gebhard  v.  N.  Y.  Club  225 

Geel  i;.  Goulden  24 

German      Land      Ass'n      v. 

SchoUer  239 

Getty  V.  Devlin  94 

Gewin  v.  Mt.  Pilgrim  Chm-ch     239, 

240 
Gibbs  V.  Gilead    •  230 

Giblan  v.  National,  etc.  Union    287 
Gibson  v.  Armstrong  269 

Gieske  v.  Anderson  312 

Gilbert  v.  Crystal  Lodge  275 

Gilchrist  v.  Transp.  Co.  180 

Gipson  V.  Morris  236 

Githens  v.  Grocery  Co.  19 

Gleason  v.  McKay      41,  43,  142 
Glenn  v.  Allison  130,   157 

Globe  Refining  Co.,  Re  21 

Glover  v.  Baker  248 

Godfrey  v.  Walker  262,  314 

V.  White  197 

Godmundson   v.    Thingvalla 

Church  260,  267 

Goell  V.  Morse  67,  194 

Goesele  v.  Bimeler  37,  239 

V.  Bimeler       9,  202,  233,  235, 
254 
GoUer  v.  Strubenhaus  233 

Goode  V.  McPherson  259 

Gorman  v.  Russell  202,  310 

V.  Russell  302 

Gortemiller  v.  Rosengarn  295 

Gott  V.  Dinsmore  15 

Gough  V.  Satterlee  176,  179 

Gould  V.  Head  150 

Goulding  v.  Standish  232 

Grady  v.  Robinson  110 

Graff  V.  Evans  251,  252 

Grain's  Case  133 

Grand     Lodge,     K.     P.     v. 

Germania  Lodge  305 

Grand  Rapids  Guard  v.  Bulk- 
ley  233 
Grassi  v.  O'Rourke  215 
Gray  v.  Pearson  202 
Great  Southern  Co.  v.  Jones         2 
Greek  Church  v.  Greek  Church  264 
Greene  v.  Dennis                 246,  247 
V.  People  173 
Greenup  v.  Barbee's  Exec.   98,  136 
Greenwood's  Case  126 
Greer  v.  Stoller                    220,  308 
Greves  v.  Shaw                         81,  83 
Griffiths  V.  Cope                          243 
Grosvenor  v.  Lloyd  110 
V.  United  Society  of  Be- 
lievers                           218 
Guild  V.  Allen                             248 


Guinane  v.  Sunnyside  Boating 
Co.  217,  218 

Habicht  v.  Pemberton  310 

Hackney  v.  Vawter  234 

Hadden  v.  Chorn  261 

Haden  v.  Clark  313 

Haines  v.  Kinderhook  162 

Halbert  v.  Traders'  Exchange     272 
Halket  v.   Merchants',  etc. 

Ass'n  131 

Hallett  V.  Dowdell      126,  131,  132, 

133 
Hamblet  v.  Bennett  246 

Hambleton  v.  Rhind  11 

Hammerstein  v.  Parsons    39,  202, 

276 
Hancock  v.  Thorpe  195 

Hancox  v.  Wall  162 

Hanley  v.  Tel.  Co.      215,  220,  307, 

308 
Hanson  v.  Innes  287,  290 

Happy  ;;.  Morton  244,  245 

Hardoon  v.  Belihos     159,  163,  277 
Hardy  v.  Carter  280 

Harper  v.  Raymond  108,  115 

V.  Straws  262 

Harrington  v.  Sendall  271 

V.  Workmen's  Ass'n  226 

Harris  v.  Aiken  217,  218,  219 

V.  Cosby  265 

V.  Lloyd  195 

V.  Wilson  311 

Harrisburg  Co.  ?;.  Washburn      295 
Harrison  v.  Hoyle  266 

Hart  V.  Seymour      32,  48,  52,  72, 

149 
Hartney  v.  Gosling  69 

Hatfield  v.  De  Long  214,  218, 

224,  228 
Hatt,  Re  14 

Haven  v.  Grand  Junction  Co.     153 

V.  Sibbald  169 

Hawke    v.     Cigar     Makers' 

Union  313 

V.  Cole  276 

Hawken  v.  Bourne       90,  126,  136 
Hawtayne  v.  Bourne  91,  136 

Hayes  v.  Hall  48 

V.  Manning  265 

Heard  v.  March  135,  162,  168 

Heater  Co.  v.  Union  312 

Heath  v.  Goslin  278,  280 

V.  N.  Y.  Gold  Exchange     231 
Hecker  v.  Cook  311 

Heckman  v.  Mees  263 

Heckscher  v.  Edenborn  185 

Heiskell  v.  Lodge  248 


XV 


TABLE   OF   CASES 


PAGE 

Heisler  v.  Methodist  Church     305 
Heiss  V.  Vosbui'g  241 

Helbig  V.  Rosenberg  235 

Hellman,  Re  211 

Helm  V.  Zarecor  265 

Henderson  v.  Allen  68 

Hendrickson  v.  Shotwell  232,  233, 

259 

Hennessey  v.  Walsh  241 

Henry  v.  Deitrick  234,  245 

V.  Jackson  9,  105 

V.  Simanton  122 

Henry  Disston,  etc.  Co.,  Re        23 

Henshaw  v.  Clark  194 

Hershiser  v.  WiUiams  219 

Hess  V.  Johnson  272 

V.  Werts  130 

Hetchett    v.    Mt.    Pleasant 


Church 

234 

Hewitt  V.  Green 

168 

V.  Phelps 

159 

V.  Storey 

96 

V.  Wheeler 

299 

Hibbs  V.  Brown             13, 

130, 

131 

Hickey  v.  Baine 

223, 

225 

Higgins  V.  Armstrong 

69 

V.  Hopkins 

281 

Hill,  Ex  parte 

311 

Hill  V.  Cornwall 

151 

V.  Eagle  Co. 

291, 

310 

V.  Rauhan  Aarre 

250 

V.  Stettler 

20 

Hill  Estate  Co.  v.  Whittlesey    244 
Hinds  V.  Battin  21 

Plinkley  v.  Blethen  122 

Hitchman  Coal  Co.  v.  Mitchell  288 
Hoadley  v.  County  Commis- 
sioners     40,  43,  141,  142 
V.  Purifoy  173 

Hoagland  v.  Cooper  168 

Hoare  v.  Dawes  190,  198 

Hocks  V.  Sprague  275 

Hodgson  V.  Baldwin  122 

Hogan  V.  Pacific  Endowment 

League  271 

Hogdon  V.  Gardner  308 

Hollister  v.  Stewart  161 

Holm  V.  Holm  245 

Holmes  V.  McDonald  135 

Iloloinuny  v.   Nat.  Slavonic 

Soc.  216,  226 

Holt  V.  Blake  77,  98 

V.  Downs  201,261 

Home  Benefit  Ass'n  v.  Wes- 
ton 307 
Hornlx'ck  v.  Wcsthrook  2'A\) 
llonihcrgcr  v.  Orcliard        27(),  278 
lloriihlouiT  /'.  Crandall  184 


Horner  v.  Meyers  80,  115 

Horsman  v.  Allen  265 

Horton    v.    Chester    Baptist 

Church  234 

V.  Smith  265 

Hosch  Lumber  Co.  v.  Weeks  167 
Hoskinson  v.  Pusey  269 

Hosman  v.  Kinneally  276 

V.  Kinneally  283 

Hossack  V.  Development  Co.      39, 

112,  114 

Hotchin  v.  Kent  124,  127 

Howard  v.  Factory  Land  Co.       25 

V.  Luce  197 

Howe  V.  Morse  32,  149 

Howell  V.  Earp  91 

Hoyt  V.  Paw  Paw  Grape  Juice 

Co.  24 

Hibbard  v.  German  Cathohc 

Soc.  235,  260 

Hudson  V.  Cincinnati  Co.  282 

V.  Spaulding  26 

V.  V.  N.  O.,  etc.  Ry.  282 

Hulburt,  Re  164 

Humbert  v.  Abeel  309 

Humphrey  v.  Burnside  269 

V.  N.  Y.,  etc.  R.  R.  Co.     153 
Hunnewell  v.  Willow  Springs 

Co.  78,  119 

Hunsberger  v.  Guaranty  Trust 

Co.  162 

Hunt  V.  Wright  121 

Huntington  v.  Ramsden  246 

Hurd  V.  Darling  194 

Hurley  v.  Hurley  195 

Hussey  v.  Arnold      44,  125,  130, 
156,  157 
Huston  V.  Rentlinger  232 

Hyde  v.  Stone  194 

V.  Woods  210 

Hynes  v.  Lilhs  231 

Imperial     Brewing     Co.     v. 

Wyman  20 

Imperial  Shale  Brick  Co.  v. 

Jewett  131,  175 

Indorwick  v.  Snell  88,  93 

Industrial  Co.  v.  Texas  127,  133 
Inglis  V.  Millersburg  Driving 

Ass'n  96,  99 

Innos  V.  Wylie  215 

Interstate  Co.  v.  Brownback  22 
Iron  Molders  Union  v.  AUis- 

Chalrners  Co.  287 

Irvine  v.  Forbes  67 

Irving  V.  Neal  288,  292 

Isear  v.  Daynes  181 

V.  McMahon  181 


XVI 


TABLE   OF   CASES 


PAGE 

Jackson  v.  Akron  Brick  Ass'n      96 

V.  Cory  239 

V.  Stanfield  290 

Jarrell  v.  Sproules  267 

Jarvis  v.  Hatheway  275 

Jenne  v.  Matlack  98 

John  A.  Fry,  Re  135 

Johns  V.  Johns  167 

Johnson,  Re  150,  159 

Johnson  v.  Lewis  62 

V.  Mayne  248 

V.  Welch  300 

Johnson  County  v.  Thayer  165 

Jones,  In  re  45 

Jones,  Re  3,  13,  142 

Jones  V.  Clark  89 

V.  Gould  7,  150,  184,  186 

V.  Hope  281 

V.  Maher  292 

V.  State  217 

V.  Towne  246 

V.  Watson  308 

Joseph  V.  Davenport  105 

Josey  V.  Union  Loan  &  Trust 

Co.  295 
J.  T.  Parkinson  Co.  v.  Build- 
ing Trades  Council  290 
Judge  V.  Braswell  •           90 

Kahn  v.  Smelting  Co.  116,  197 
Kaiser  v.  Lawrence  Savings 

Bank  26 

Kalbitzer  v.  Goodhue  252 

Kearns  v.  Leaf  133 

Keasley  v.  Codd  98 

Kehlenbeck  v.  Logeman  271,  272 
Keller  v.  Tracy  310 

Kelley  v.  M'Namee  110 

Kelly  V.  Illinois  State  Trust 

Co.  185 

Kelsey  v.  Jackson  295 

Kemp  V.  Division  No.  241  288 
Kennedy  v.  Boykin  197 

V.  Hodges  83 

Kentucky  Lodge  v.  White  226 
Kenyon  v.  WiUiams  88 

Kerr  y.  Hicks  200,  236 

Kerrison  v.  Stewart  165 

Ketcham  v.  Mobile,  etc.  Co.  169 
V.  Provost  211 

Ketchum,  Re  210 

Ketchmn  v.  Belding  178 

Kierstead  v.   Bennett  26,   88 

Kimball  v.  Lower  Columbia 

Ass'n  274,  310 

Kimberly  v.  Arms  116 

Kimmins  v.  Wilson  104 

King  V.  Accumulative  Co.        133 


PAOB 

King  V.  Nichols  312 

V.  Stowell  159 

V.  TowTishend  136 

Kingsland  v.  Braistead  95,  103 
Kingston  v.  Salvation  Army      307 

Kinkead  v.  McKee  306 

Kinney  v.  Treasurer  83 

Kirchner  v.  Smith  69 

Kisor's  Appeal  251 

Klein  v.  Rand  310 

Knapp  V.  R.  R.  Co.  169 

Knorr  v.  Bates  179 
KnottesviUe  Co.  v.  Mattingly     105 

Knox  V.  Gye  418 

Koehler  v.  Brown  104 

Konta  V.  Stock  Exchange  209 

Kopp  V.  White  217 
Koprucki  v.  Wojenechowski    297 

Korsted  v.  Williams  277 

K.  P.  V.  I.  K.  P.  245 

Kramer  v.  Arthurs  80 

Krause  v.  Sander  210,  218 

Krecker  v.  Shirey  230 

Kriegman  v.  Dxmphy  180 

Kuehl  V.  Meyer  301,  304 

Kuns  V.  Robertson  264 

Kutemen  v.  Lacy  300 

Labouchere  v.  Earl  of  Wham- 

cUffe  217,  219 

Ladner  v.  Gibbon  22 

Laflin  Co.  v.  Steytler  20 

Lafond  v.  Deems  201,  225,  302 
Lahiff  V.  Benev.  Soc.  224,  275 
Lake  v.  Mimford  88 

Lamb  v.  Cain  264 

Lambert  v.  Addison  214,  215 

Lamson  v.  Hewell  216 

Land  Title  &  Trust  Co.  v.  As- 
phalt Co.  167 
Lander  v.  Logan  20 
V.  TilUa  20 
Landis  v.  Campbell             228,  275 
Landman  v.  Entwhistle              281 
Landrith  v.  Hudgins                   265 
Lane  v.  Albertson  14 
V.  Fenn                                  184 
Laney  v.  Fickel                            103 
Langvein  v.  Tongue                    176 
Lathrop  Haskins  &  Co.,  Re      198 
Laughlin  v.  Greene                        96 
Laughton  v.  Griffin                      134 
Lavretta  v.  Holcombe                 250 
Lawler  v.  Loewe          290,  291,  292 
V.  Murphy                             280 
Lawrence  v.  Curtis                      169 
V.  Schaefer                  177 
Laycock  v.  State  2 


XVll 


TABLE   OF   CASES 


PAGE 

La^^lg  v.  A.  French  Co.  23 
L/D.  Willcut  &  Son  Co.  v. 

Bricklayers'  Union  290 

Leahy  v.  WilUams  293 

Leatherman  v.  Wolf  240 

Leavitt  v.  Peck  123 

Le  Blanc  v.  Lemaire  250 

Lee  V.  Burnley  21 

Lee  Mut.  F.  Ins.  Co.  v.  State  2 

Leech  v.  Harris  216 

Leigh  V.  Dickeson  197 

Leiter  v.  Beecher  177 

Lemp  V.  Raven  265 

Lennig  v.  Penn.  Morocco  Co.  19 

Leonard  v.  Davenport  247 

Leventritt,  Re  161 

Levin  v.  Cosgrove  272 

Lev>'  V.  U.  S.  Grand  Lodge  225 

Lewis  V.  McElwain  96 

V.  Tilton  298 

V.  VoUva  233 

V.  Watson  261 
V.  Wilson                       217,  220 
Liederkranz  Societv  v.  Ger- 

mania  Turn  Verein  200,  249,  309 
Life  Ass'n  of  Scotland  v.  Sid- 

dal  48 
Liggett  V.  Ladd                   239,  309 

Light  Co.  V.  Muncey  96 

Lightbourne  v.  Walsh       276,  278, 

280 
Lilly  V.  Tobbein         307,  308,  309 

Linaker  v.  Pilcher  296 

Lincoln  v.  CrandaU  298 
Lindermann  v.  Advance  Stove 

Works  203 
Linn  v.  Carson  294 
Linnell  v.  Leon  2,  81 
Lipsett  V.  Hassard  24 
Little  V.  Willford  248 
Littleton  v.  I.  O.  U.  A.  M.  232, 
307,  312 
Liverpool  Ins.  Co.  v.  Mass.  16 
Livingston  v.  Lynch  92 
Lloyd  V.  Loaring  309 
V.  Lynch  195 
Loewe  v.  California,  etc.  Fed- 
eration 290 
V.  Lawlor  290 
Logan  V.  McNaugher  38 
Lolisc  V.  Fuollc  287 
London  Marine  Ins.  Ass'n  126 
Lf)ng  (;.  Harvey  236 
Fvord  V.  Kquitable  Soc.  154 
Loubat  V.  Ln  Hoy  222,  225 
Loud  V.  Winchcsicr  168 
Lf)Vo  ;;.  Blair  8 
Lovejoy  v.  Whitconib  275 


PAGE 

Lowrey  v.  Bates  180,  181 
Loy  V.  Alston  116 
Lucas  V.  Case  275 
V.  Williams  155 
Lucke  V.  Clothing,  etc.  As- 
sembly 288 
Luckombe  v.  Ashton  300 
Ludlam  v.  Higbee  242 
Lumbard  v.  Grant  273 
Lunsford,  etc.  Co.  v.  Wren  307 
LjTnan  v.  Schwartz  68 
LjTich  V.  Postlethwaite  98 
Lynd  v.  Menzies  264 
Lynn  v.  Commercial  Club  280 
Lj'on  V.  Worcester  134 
Lyons  v.  Planters  294 
Lyttleton  v.  Blackbm'ne  215 

McAlUster  v.  Hoadley  181 

McCabe  v.  Goodfellow  281 

McCain  v.  Smith  24 
McCaUion  v.  Hibernia,  etc. 

Soc.  224 

]\IcCallister  v.  Ross  297 

McCartee  v.  Chambers  298 
McCarthy  v.  Caledonia  Coal 

Co.  93 
McConnell  v.  Denver             70,  92 

V.  Gardner  309,  310 
McCord  V.   Thompson-Star- 

rett  Co.  237 

INIcCready  v.  Thrush  181 

McCreary  v.  Chandler  95 

McDearman  v.  McClure  197 

McDonald  v.  Fleming            9,  124 

V.  Gray  311 

McDougal  V.  Fuller  164 

McDowell  V.  Joice       94,  110,  111 

^IcFadden  v.  Leeka  38 

V.  :\Iurphy  250 

McFaddin  v.  Wiess  137 
MacGeorge  v.  Chemical  INIfg. 

Co.  23 

McGlynn  v.  Post  312 

McGourky  v.  Toledo  Co.  152 

IMcGraw  v.  Bayard  164 

McGrcarcy  v.  Chandler  299 

McGinnis't).  Watson  264 

McGuire  v.  Trustees  230 

Mclntyre  v.  Belcher  132 

McKane  v.  Adams  214 

McKeon  v.  Kearney  247 

McKinley  v.  Irvine  135 

McKinney  v.  Griggs  262 

McKinnie  v.  Postles  299 

McLain  v.  Matlock  275 

McLaughlin  v.  Center  Co.  22 

V.  Wall  250 


XVlll 


TABLE   OF   CASES 


PAGE 

McLean  v.  Tobin  178 

M'Mahon  v.  Meehan  68 

V.  Rauhr  274 

McMillan  v.  Whitlev  190 
McNeal  v.  Market  Co.           88,  96 

McRoberts  v.  Moudy  261 

McVicker  v.  Ross  17 

McWilliams  v.  Willis  299 

Machias  Co.  v.  Coyle  105 

Machinists'  Bank  v.  Dean  119 

Mack  V.  Engel  24 

V.  Krine                        261,  265 
Mackenzie  v.  Edinburg  Board 

of  School  Trustees  307 

Macomber  v.  Endion  Co.  25 

Macon  Co.  v.  Riggs  250 

Mader  v.  Norman  69 
Maisch  v.  O.  A.                    293,  308 

Maitland  v.  Bramwell  275 

Makin  v.  Sav.  Inst.  44 
Mallory  v.  RusseU  62,  80 
Maltz  V.  American  Express 

Co.  14 

Manderson's  Appeal  160 

Mandsley  v.  LeBlanc  98 
Mann  v.  Butler             95,  121,  133 

Manning  v.  Gasharie     88,  98,  124, 

137 
V.  Klaus  222 
V.  San  Antonio  Club  215 
V.  Shoemaker  251 
Mannix  v.  Purcell,     240,  241,  244 
Manville  v.  Parks  89 
March  v.  Romare  170 
Marien  v.  Evangelical  Con- 
gregation 260 
Marks  v.  Gates  68 
Marmont  v.  State  252 
Marshall  v.  Loveless  309 
V.  Pilot's  Ass'n  271 
V.  Virden  233 
Marsh  River  Lodge,  F.  &  A. 

M.  V.  Brooks  308 
Marston  v.  Durgin  107 
MarteU  v.  White  289 
Martin  v.  Board  240 
V.  Dryden  95 
V.  Strong  275 
Marx  V.  McGlynn  246 
Mason  v.  Finch  302 
V.  Pomeroy  158 
Masters  v.  Lander  20 
Masterson  v.  Botts  313 
Matthews  v.  Bliss  196 
Maxwell  v.  McWiUiams  183 
May  V.  May                         169,  170 
Mayer  v.  Journeymen  Stone- 
cutters' Ass'n  210 


PAGE 

Mayo  V.  Moritz              42,  43,  157 

Mayor  v.  Johnson  211 

Mazaika  v.  Krauczunas  244 

Mead  v.  Stirling  225 

Meadville  Sav.  Bank  Estate  112 

Meagher  v.  Reed  117 

Meehan  v.  Valentine  69 
Mendenhall,  Re                      26,  97 

V.  First  Church  240 

Mendeth,  Ex  parte  126 

Merad  Oil  Co.  v.  Patterson  81 

Mercantile  Bank  v.  Lauth  22 

Mercer  v.  Buchanan  149 

Merchant  Traders'  Ass'n  132 
Merchants  National  Bank  v. 

Wehrmann                     1,  71,  102 

Meriwether  v.  Atkin  278 

Merrick  v.  Brainerd  115 

Merrill  v.  Farmers'  Co.  166 

V.  Milliken  183 

Mesisco  V.  Guihano             222,  223 

Messing  v.  Messing  194 
Metal  Stamping  Co.  v.  Cran- 

daU  94 
Metropohtan  Base  Ball  Ass'n 

V.  Simmons  220 
Met.  St.  Ry.  v.  Adams  Ex-press 

Co.  16 
Met.   Trust   Co.   v.   Central 

Trust  Co.  166 
Meurer  v.  Detroit  Musicians, 

etc.  Ass'n  221 
Meyer  v.  Furnitvu-e,  etc.  Co.  96 
Michenor  v.  Reinach  252 
Midwood  V.  Wholesale  Gro- 
cers Ass'n  203 
Miller  v.  New  York  Builders' 

League                  216,  217 

V.  Riddle  304 

V.  Rutland  Co.  165 

Mills  V.  State  3 

Minasian  v.  Osborne  287 

Minnett  v.  Lord  Talbot  297 

Minor  v.  Lodge  251 

Minot  V.  Winthrop  142 

Mitchell  V.  Chambers  192 

V.  Hitchman  Co.  287 

V.  Whitlock  157 

Mogul  Co.  V.  McGregor  289 

V.  McGregor  286 

Mokelumne  Co.  v.  Knox  312 

Montgomery  v.  Knox  95 
Montgomery  Ward  &  Co.  v. 

South  Dak.  Ass'n  289 

Moody  V.  Flagg  133 

Moon  V.  Flack  221 

Moore  v.  Brink  14 

V.  May  77,  109 


XIX 


TABLE   OF   CASES 


PAGE 

Moore  v.  McGljTin  159 

V.  Stemmons  293 

V.  Telephone  Co.       202,  207, 

211,  250,  304 

Moore  Co.  v.  National  Sav. 

Co.  170 

Morey  v.  Clopton  193 

Morgan  v.  Gabard  265 

V.  South  Co.  169 

Morris,  Re  160 

V.  Mettaline  Co.  23 

Morrisey  v.  Weed  122 

Moseman  v.  Heitzhuzen  255 

Mountcashel  v.  Barber  300 

Moetze  v.  Tuteur  283 

Mullen  V.  Beach  Grove  Driv- 
ing Park  3 
Muh-oy  V.  Supreme  Lodge        202, 
219,  225 
Munford  v.  Brown                       197 
Munroe  v.  Colored  Ass'n          217, 
219,  287 
Munroe  County  Alliance  v. 

Owens  212 

Munsford  v.  NicoU  192 

Murrav  v.  McHugh  273 

V.  Walker  208,  276 

Mutual  V.  Reser  95,  96 

Mutual  Life  Co.  v.  Imnan 

Parks  Church  307 

M.  W.  Powell  Co.  i;.  Finn         109 
Myers  v.  Jenkins  281 

Myrick  v.  Dame  103 

Nachtrieb  v.  Harmony  Set- 
tlement 253 
Nakegawa  v.  Okamoto  297 
Nance  v.  Busby        208,  214,  258, 

309 
Na.sh  V.  Sutton  241 

Nashua  Bank  v.  Abbott  211 

Natchez  v.  Minor  88 

National  Ass'n  v.  Cummings      288 
National  Bank  v.  Van  Der- 

werker  19 

V.  Dulaney  164 

National  Fireproofing  Co.  v. 

Mason's  A.ss'n  289 

National     Parks     Bank     v. 

Nichols  109 

Nay  V.  Scranton  Trust  Co.         161 
Near  ?;.  Donnelly  192 

Neil!  V.  Spencer  276 

Nelson  V.  Drake  19 

New  V.  Nicholl  155,  159 

Newell  V.  Borden  91,  276 

New   JfTsey,   etc.   Works  v. 
Ackennan  178 


New  Sombrero  Co.  v.  Erlanger  99 
Newton  v.  Ralfe  160 
N.  Y.  Bank  v.  CroweU  110 
N.  Y.  Board  of  Fire  Under- 
writers V.  Whipple  175 
Niagara  County  v.  People  2 
Nichols  V.  Buell  25 
Nielson  v.  Gross  69 
Nightingale  v.  Barney  307 
Nisbet  V.  Nash  122 
Niven  v.  Spickerman  104 
Nolan  V.  Lovelock  90 
Nolan  V.  McNamee  98 
Norris,  In  re  190 
North  Church  v.  McGowan  245 
Norton  v.  Phelps  159 
Norwood  V.  Francis  107,  110 
Novicis  V.  Krauczunas  244 
Nunn  V.  Louis viUe  308 

O'Bierne  v.  Allegheny  Co.  166 

O'Brien  v.  Grant  128 

V.  Musical  Union  227 

O'Connell  v.  Lamb  308 
Odell  V.  Boyden                   210,  211 

Odiorne  v.  Maxey  88 

O'Donaghue  v.  McGovern  275 

O'Hear  v.  De  Goesbriand  246 

Ohver  v.  Hopkins  225 

V.  Liverpool   &   London 

Co.  16 
Ohver 's  Estate  81,  92 
Opinion  of  Attorney  General, 

re  License  177 

Opinion  of  the  Justices  143 

Opinion  of  the  Justices  296 

Orleans,  The,  v.  Phoebus  197 

O'Rourke  v.  Kelley  207 

Orr  V.  Yates  162 

Osborne  v.  Dickey  298 

V.  Holland  2 

Osceola  Tribe  v.  Schmidt  216 
Ostrom  V.  Greene  202,  236,  303 
Otto  V.  San  Francisco,   etc. 

Union  221 

Overton  v.  Hewett  276 

Owens  V.  Caraway  295 

V.  Methodist  Soc.  247 


P.  V.  N.  Y. 

219 

Pafldock  V.  Brown 

276 

Page  V.  Edmunds 

210 

Park  V.  Spaulding 

279 

Park  Co.  V.  Kelly  Co. 

22 

Parker  v.  May 

201 

309 

V.  Oliver 

252 

Parks  V.  Trust  Co. 

304 

Parmenter  v.  Barstow 


157 


XX 


TABLE   OF   CASES 


PAGE 

Parrott  v.  Eyre  98 

Patch  Mfg.  Co.  V.  Capeless     202, 

281 
Paton  V.  Clark  136 

Patrick  v.  Weston  117 

Patterson  v.  Tidewater  Co.         23 
Payne  v.  Lodge  309 

V.  Snow  285 

Peabody  v.  Eastern  Methodist 

Soc.  243,  244 

V.  Germain  178 

V.  Treasurer  81,  83,  142 

Peace  v.  Christian  Church         259 
Pease  v.  Pease  3 

Peckham  v.  Wentworth  312 

Peckner  v.  Webb  16 

Penfield  v.  Skinner  305 

Pennington  v.  Met.  Museum 

of  Art  167 

People  ex  rel.  Winchester  v. 

Coleman  13 

People  V.  Brander  3 

V.  Chicago  Board  of  Trade  232 
V.     Coachman's     Union 

Benev.  Soc.  219 

V.  Coleman  3 

V.  Feitner  211 

V.  Loew  182 

V.  Manhattan  Chess  Club  217 
V.  North  River  Co.         28,  40 
V.  North  River  Sugar  Re- 
fineries 315 
V.  Rose  2 
V.  Wemple                                14 
V.  Young  Men's,  etc.  Soc.  219 
Perkins  v.  Siegfried                    309 
Permanent  Committee  v.  Pa- 
cific, etc.  Church                     265 
Perrin  v.  Lepper                           162 
Perry  v.  Granger                          194 
V.  Hale                                     26 
V.  Tupper                              209 
V.  Wheeler                              230 
Peterson  v.  Beggs                         69 
V.  Chicago,  etc.  Ry.  Co.       56 
V.  Samuelson                        209 
Philadelphia    Baptist    Ass'n 

V.  Hart  247 

Phillips  V.  Blatchford      40,  41,  43, 

118,  119,  132 

V.  Jones  117 

Philomath  College  v.  Wyatt      265 

Phipps  V.  Jones  201 

Phoenix  Ins.  Co.  v.  Biirkett       299 

Pickett  V.  Walsh        286,  288,  289, 

290,  292,  307,  308,  310 

Pierson  v.  Gardner  303 

Pillgrem  v.  Pillgrem  158 


PAGE 

Pipe  V.  Bateman  309 
Pirics  V.  First  Russian  Soc.     202, 
221,  223,  303 
Pitcher  v.  Board  of  Trade  216 
Pittsburg  Co.  v.  Reese  22 
Pittsburg  Wagon  Works  Es- 
tate 80 
Plant  V.  Woods  288 
Piatt  V.  Colvm  15 
V.  Jones  210 
Pomeroy  v.  Latting  88 
Pooley,  Re  164 
Pooley  V.  Driver  11 
Porter  v.  Pittsburg  Co.  55 
Potter  V.  Search  232 
V.  Thornton  259 
Poultney  v.  Bachman         231,  272 
Pounder  v.  Ashe  214 
Powell  V.  Waldron  211 
Powell  Co.  V.  Finn  95 
Powers  V.  Budy  228 
V.  Journeymen  292 
Powhatan  Steamboat  Co.  v. 

Potomac  Steamboat  Co.  312 
Poynter  v.  Phelps  262 
Pratt  V.  McGuinness  78 
V.  Roman   Catholic  Or- 
phan Asylum  247 
Predestinarian  Church  v. 

United  Church  260 
Presbyterian  Church  v.  Don- 

nom  259 

Prickett  v.  Wells  243 

Primm  v.  White                  202,  302 

Pringle  v.  Dorsey  306 

Printers',  etc.  Soc,  Re  (1899)  304 

Prinz  V.  Lucas  158 
Professional   Life  Assurance 

Co.,  The  132 
Professional   Life   Assurance 

Co.,  Re  35 
Pullman  Car  Co.  v.  Missouri 

Pacific  Ry.  Co.  55 

Purdy  V.  Lynch  162 

Putnam  v.  Wise  194 


Queen  v.  Robson 

200 

Quimby  v.  Tapley 

91, 

136 

t).  Uhl 

151 

Rabb  V.  Trevelyan 

217, 

224 

Raggett  V.  Bishop 

270 

V.  Musgrove 

270 

Railli  V.  TMiite 

179, 

180 

Ramell  v.  Duffy 

226 

Ramsey  v.  Hicks 

265 

Ramsey's  Appeal 

258 

Randall  v.  Meredith 

90 

XXI 


TABLE   OF   CASES 


Randolph  v.  Xichol 

PAGE 

122 

Roberts  v.  Hill 

PAGE 

311 

V.  Southern   Beneficial 

Robertson  v.  Walker         202 

251 

League 

227 

Robinson  v.  Robinson      299, 

308 

Ranken  v.  Probev 

98 

V.  Yates 

223 

Ratchffe  v.  Sangston 

168 

Robinson's  Settlement,  Re 

157 

Rav  V.  Powers 

276 

RockweU  V.  Dewees 

195 

RaVbould.  Re  (1900)         159, 

160 

Rodgers  v.  Bennett 

258 

Raych  v.  Hadida                 218, 

275 

Rodgers     Printing     Co.     v. 

Ra\Tnond  v.  Colton                 1. 

5,  IS 

Santa  Claus  Co. 

23 

Redgate  v.  Roush 

275 

Roger     Wilhams     Bank     v. 

Reding  v.  Anderson           239, 

244 

Groton  Co. 

155 

Redington  v.  Chase 

194 

Rogers  r.  Pell 

170 

Redway  v.  Sweet 

202 

Roofing  Co.  V.  Int.  -\ss'n    203 

310 

Reed  v'.  St.  Ambrose  Church 

241 

V.  Jose 

291 

Reeve  v.  Parkins 

303 

Roper  V.  Burke 

304 

Reeves  v.  Reeves 

247 

Rorke  v.  RusseU 

17 

Reformed,    etc.    Church    v. 

Roschi's  Appeal 

258 

Xott 

245 

Rosenthal  v.  Reinfeld 

314 

Regina  i'.  Robson 

9 

Rountree  v.  Blount 

297 

Rehfuss  V.  Moore 

20 

Rom-ke  v.  Drug  Co.           288 

312 

Reid  V.  Allan 

132 

Rouse  r.  Detroit  Cj'cle  Co. 

24 

Remington  v.  Congdon 

275 

Rousseau  v.  Call 

270 

Reorganized  Church  v.  Church 

Rowe  V.  Hewitt 

223 

of  Christ                          244, 

267 

Ruddy  v.  L'nited  Ass'n 

295 

Re\-neU  v.  Lewis                      26,  27 

Rudolph  V.  Southern  Benefi- 

Rhinelander i'.  Farmers  Co. 

161 

cial  League                     232, 

297 

Rhoads  r.  Fitzpatrick 

278 

Ruhl  V.  Ware 

312 

Rhodes  v.  Maret 

311 

Runkle  v.  Biurage 

188 

Rhodes  Bros.   Co.  v.   Musi- 

Ruse V.  Wilhams 

253 

cians'  L'nion 

293 

Russie  I'.  BrazzeU 

264 

Rianhard  v.  Hovev              91, 

109 

Rice  V.  Rockefeller      115,  315 

318 

S.  V.  Live  Stock  Exchange 

308 

Richards  v.  Bartram 

296 

St.  James  Club,  Matter  of 

276 

V.  Merrimack  Co. 

170 

St.  John's  Church  v.  Hanns 

246 

Richardson,  Ex  parte 

150 

St.  Louis  Ry.  v.  Thompson 

224 

Richardson    v.   Francestown 

St.  Marj^'s  Benev.  Ass'n  i-. 

Union  Cong.  Soe.  210, 235 

L^-nch                              298, 

301 

V.  Harsha 

2 

St.  Paul's  Church  v.  Hower 

234 

V.  Hastings 

308 

Saksman  v.  Shuhz           17,  91 

103 

Richmond  v.  Judj^              200, 

280 

Sanchez    v.    Grace    M.    E. 

V.  Pinnix 

25 

Chvu-ch 

244 

Richmond   Cedar   Works   v. 

Sanders  v.  Baggerly 

265 

Buckner 

176 

V.  Edhng                         17 

103 

Richter  v.  Kabat 

251 

Sandford  v.  Halsey 

104 

Rickart  i'.  People 

213 

V.  Super\'isors 

14 

Rickcr  t-.  American  Loan  & 

San  Francisco  v.  Anderson 

211 

Trust  Co.           41,  43,  141, 

153 

Sangston  v.  Gordon 

243 

Ricketts  i-.  Bennett 

136 

Santa  Clara  Mining  Ass'n  v. 

V.  Bennett 

90 

Quicksilver  Mining  Co. 

95 

Ridgely  v.  Hobson 

280 

Satterlee  v.  Wilhams 

229 

Riffe  V.  Proctor          276,  281 

298 

Saunders  v.  Adams  Express  Co.     3 

Rigby  V.  Connol 

214 

V.  Am.  Express  Co. 

312 

Riggs  V.  Swann 

129 

Savage  v.  Putnam 

111 

Riley  V.  DiggH 

247 

Savannah  Cotton  Exchange 

Robbin.s  V.  Butler          99,  108 

109 

V.  State 

222 

f.  Waldo  Lodge 

273 

Sawyer  v.  Baldwin 

314 

r.  Wells                             16.  17 

Schiller  Commander^-  Xo.  1, 

Robbin.s  Co.  v.  Weber 

21 

U.  F.  M.  r.  Jaennichen 

250 

XXll 


TABLE   OF   CASES 


PAGE 

Schlichter  v.  Keiter  264 

Schmidt  v.  Gunther  307 

Schneider  v.  Local  Union         216, 
224,  226 
Schnorr's  Appeal  258 

Schouten  v.  Alpine  224 

Schradi  v.  Dornfeld  263 

Schultze  V.  Van  Doren  166 

Schumacher  v.  Sumner  Tel. 

Co.  9,  276,  277 

Schwartz  v.  Duss  253 

V.  Welcher  312 

Schweicher  v.  Husser  229 

Scott  V.  Clark  123 

V.  Rand  48 

Seaboard  Fire  Underwriters, 

Re  2,  66,  172 

Seattle  Co.  v.  Hansen  307 

Settembre  v.  Putnam  117 

Sewall  V.  Breathitt  Lodge  282 

Sewell  V.  Ives  210 

Sexton  V.  Graham  193 

Shaker  Soc.  v.  Watson  294,  298 
Shamburg  v.  Ruggles  109 

Shannon  v.  Frost  262 

Sharp  V.  Bonliam  265 

Shaw    V.     Norfolk     County 

R.  R.  Co.  165 

Shaw,  Kendall  &  Co.  v.  Brown  24 
Shearer  v.  Shearer  79 

Sheble  v.  Strong  20 

Sheehy  v.  Blake  277,  278 

Shepard  v.  Jacobs  52 

Sherard  v.  Walton  265 

Sherry's  Appeal  216 

Sherwood  v.  Am.  Bible  Soc.  247 
Shipwright's  Ass'n  v.  Mitchell  250 
Shirk  V.  Lafayette  169 

Shoe,  etc.  Bank  v.  Dix  130,  157 
Shurtleff  v.  Parker  275 

V.  Stevens  275 

SickeLsteel  v.  Edmonds  104,  106 
SiddaU,  In  re  45 

Siebert  v.  Minn.  Co.  166 

Siff  V.  Forbes    _  276,  278 

Simmons  v.  Alhson  264 

Simpson  v.  Ritchie  104 

Sizer  v.  Daniels  276,  281 

Skilhnan  v.  Lachman  92,  117,  129 
Skinner  v.  Shew  286 

Slater  v.  Haas  110 

Slaughter  v.  American  Bap- 
tist Missionary  Society    97,  207 
Small  V.  Atwood  95 

V.  Cahoon  235 

V.  Federation  307 

Smith  V.  Anderson    44,  48,  58,  71, 

73 


Smith  V.  Charles 

251 

V.  Fagan 

106 

V.  Goode,  etc.  Co. 

295 

V.  Hall  Glass  Co. 

126 

V.  Hollis 

216 

V.  Hollister 

209 

V.  Kinney 

190 

V.  Kerr 

304 

V.  Nelson  235,  248,  309 

V.  Pedigo  260,  267 

V.  Pinney  309 

V.  Swormstedt  310 

V.  Virgin  112 

V.  Wilhams  152 

Snow  w.  Hazelwood  11 

V.  Wheeler  288,  309 

Snowden  v.  Crown  Cork  & 

Seal  Co.  249 

Snyder  v.  Lindsey  17 

V.  Lindsey  135 

Soller  V.  Mouton  307 

South  Society  v.  Crocker  240 

South   Wales   Federation   v. 

Glamorgan  Co.  296 

Southern  Steam  Packet  Co. 

V.  Magi-ath  27 

Southworth  v.  Smith  194 

Sovei-eign  Life  Assurance  Co.     132 
Sparhawk  v.  Yerkes  210 

Speidell  v.  Henrici  253 

Spence  v.  Whitaker  108 

Spenglar  v.  Kuhn  167 

Spier  V.  Hyde  189 

Spottswood  V.  Morris     39,  92,  121 
Spraker  v.  Piatt  19 

Spring     Green     Church     v. 

Thornton  242 

Spies  V.  People  287 

Stanton  Iron  Co.,  Re  152 

Staples  V.  Hobbs  211 

Starkweather  v.  Jenner  195 

State  V.  Ackerman  173 

V.  Adams  Express  Co.  15 

V.  Alley  174 

V.  Baseball  Ass'n         221,  223 

V.  Bienvenue  275 

V.  Brown  166 

V.  Cook  275 

V.  Cummins  214,  223 

V.  Grand  Lodge  226 

V.  Johnson  169 

V.  McPhail  211 

V.  Medical  Soc.  218 

V.  Mercer  213 

V.  Piatt  164 

V.  Standard  Oil  Co.      28,  40, 

154,  315, 318 

V.  Steele  2 


XXlll 


TABLE   OF   CASES 


State  V.  Stone 

PAGE 

174 

Taylor  v.  Mahoney 

PAGE 

169 

V.  Trustees 

23.5 

V.  Salmon 

95 

V.  V.  S.  Express  Co. 

15 

Teague  v.  Corbitt 

164 

V.  Warren 

247 

Teed  v.  Parsons            9,  200, 

277 

V.  Williams 

237 

Temple  v.  Vincent 

239 

State    ex    rel.     Hoadley 

V. 

Tenney  v.  N.  E.  Protective 

Board   of    Ins.   Com- 

Union                         39,  110 

115 

missioners 

177 

Thomas,  In  re 

45 

State  Fii-e  Ins.  Co. 

132 

133 

Thomas  v.  Clark 

109 

Staver  Co.  v.  Blake 

24 

V.  Dakin 

2 

Steele  v.  Gourlev 

301 

V.  EUmaker                  251, 

302 

Stemmerman  v.  Lilienthal  302,  310 

Thomas    Russell    &    Son    v. 

Stems  Co.  v.  Williams 

152 

Stampers',  etc.  Union     290 

292 

Stevens  v.  Thompson 

197 

Thompson  v.  Adams            210 

211 

Stewart  v.  White 

239 

V.  Cathohc    Congrega- 

Stieghtz V.  Belding 

178 

tional  Soc. 

231 

Still  V.  Holbrook 

122 

V.  Colonial  Assurance  Co. 

175 

Stimson  v.  Lewis 

107 

V.  Garrison 

276 

Stockdale  v.  Maginn 

106 

Thorndike  v.  De  Wolf 

192 

Stogner  v.  Laird 

261 

Thurmond  v.  Cedar  Springs 

Stone  V.  Textile,  etc.  Ass' 

n 

203 

Baptist  Church        200,  277 

307 

Storebe  v.  Albert 

3 

Tide    Water    Co.    v.    State 

Stradley  v.  CargiU  Co. 

93 

Board  of  Assessors 

15 

Strang  v.  Osborne 

107 

193 

Tidewater  Pipe  Co.  v.  Kitch- 

Stratton  v.  European  Co. 

161 

enman 

22 

V.  European  R.   R. 

157 

V.  Satterfield 

92 

Strauss  v.  Thoman 

279 

Tindel  v.  Park 

21 

Straw  V.  Murray 

23 

Todd  V.  Emly 

300 

Strebe  v.  Albert 

13 

Torrey  v.  Baker 

301 

Strempel  v.  Rubing 

225 

Tctt-nsend  v.  Golwey 

105 

Strickland  v.  Prichard 

304 

Tracy  v.  Banker 

313 

V.  SjTnons 

1.59 

Tradesman's  Bank  v.  Astor 

124 

Stringham  v.  Durkee 

88 

105 

Travers  v.  Abbey 

230 

Strong  V.  Growers'  Ass'n 

209 

Tredwen  v.  Boiu-ne 

90 

V.  Harvey 

202 

Trowbridge  v.  Scudder 

26 

Stuart  V.  Adams 

91 

Troy   Iron,   etc.    Factory  v. 

Sturges  V.  Knapp 

1.54 

Corning 

115 

Sullivan  v.  Campbell 

128 

True    Reformed    Church    v. 

Sumner  v.  Piza 

181 

Iserman 

259 

Swaine  v.  Miller 

227 

Trust,  etc.  Co.  v.  Waldhauer 

237 

Swan  V.  Davenport 

1.35 

Trustees  v.  HenscheU 

214 

Swartwout  v.  Evans 

194 

V.  Proctor 

234 

Sweeney  v.  Hugh  McLaugh- 

V. Seaford 

261 

lin  Soc. 

220 

V.  Sturgeon 

259 

Swoope  V.  Wakefield 

108 

115 

V.  Trustees 

248 

Sykes  v.  Beedon 

12 

Tschetinian  v.  City  Trust  Co. 
Turner  v.  Sawyer 

161 
196 

Tabor  v.  Breck 

119 

132 

Turpin  t'.  Bagley 

234 

Taff  Vale  Ry.  Co.  v.  Amal- 

Tyler  v.  Galloway 

15 

gamatffi  Soc. 

296 

TjT^othetae  v.  Union 

307 

Taft  r.  Warrl 

15 

V.  Union 

203 

Tanner  r.  Rankon 

233 

Tyrrell  v.  Washburn      8,  37 

38, 

Tiiranto,  Tlic 

97 

110,  118 

124 

'J\-irb<-ll  r.  C.ilTord 

209 

Tyser  v.  Shipowners'  Syndicate 

176 

Taylor  r.  lialdwin 

197 

Ty.son  v.  Applegatc 

166 

(;.  C;i.stl(! 

91 

V.  Davi.s 

130 

1.55 

Ubhoff  i;.  Brandenburg 

168 

i;.  lOdson 

200 

Ulmer  v.  Muoster 

271 

TABLE   OF   CASES 


Unangst  j;.  Shortz  243,  251 

Underwriters  v.  Johnson  21G 

V.  Mercantile  Co.  308 

Union  v.  Barnes  310 

Union  Invest.  Ass'n  v.  Lutz  250 
Union  Land  Co.  v.  Gwynn  184 
Union  Trust  Co.  v.  Oliver  162 

V.  Van  Schaick  184 

United  Press  Co.  v.  AbeU  Co.      98, 

102 
United  States  v.  Adams  Ex- 
press Co.  3,  14,  140 
V.  Gomez  292 
V.  State  of  N.  Y.  163 
V.  Trinidad  Coal,  etc.  Co.      2 
Unterberg  v.  Elder  180 
U.  O.  A.  D.  V.  Mullen                304 

Van  Aerman  v.  Bleistein  3,  13,  16 
Vandever's  Appeal  168 

Van  Horn  v.  Corcoran  20 

Van  Home,  Re  244 

Van  Home  v.  Fonda  195 

Van  Houten  v.  Pine    293,  303,  310, 

311 
Van  Sanden  v.  Moore  111 

Vasconcellos  v.  Ferraria  263 

Vattier  v.  Roberts  109 

Venable  v.  Coffman  269 

Villas  y.  Farwell  104,  118 

Virginia  Co.  v.  Fisher  166 

Volger  V.  Ray  276 

Von   Arx   v.    San    Francisco 

Verein  215,  222 

Von  Sclimidt  v.  Huntington       95, 

121 
Vredenburg  v.  Behan  283 

Wachtel  v.   Noah   Widows', 

etc.  Soc.  219,  222 

Wadsworth  v.  Duncan  98,  108, 

109,  110,  112 

Waite  V.  Merrill  253 

Walburn  v.  Ingilby  124 

Walker  v.  Beecher  180 

V.  Keystone  Co.  22 

V.  Ogden  105 

V.  Wait  103 

Wall  V.  Thomas  137 

Wallace  v.  Hughes  265 

V.  People  249 

V.  Trustees  of  General 

Assembly  231 

Wallingford  Co.  v.  Fox  105 

Walworth  v.  Holt  95 

Ward  V.  Brigham  26,  191 

V.  Davis  134 

V.  Ward  197 


PAGE 

Warfield  Howell  Co.  v.  Wil- 
liamson 176,  182 
Waring  v.  Cram  94 
Warnebold  v.  Grand  Lodge      218 
Warner  v.  Beers                     96,  131 
Warren  v.  Pazolt                         162 
V.  Pim                                      154 
V.  Stearns                              270 
Warthe  v.  Radde                         106 
Washbon  v.  Hixon                       297 
Washburn  v.  Acome                    246 
Waterbury  v.  Merchants  Co.       14 
Waterford  Y.  M.  C.  A.,  In  re     247 
Waterlow  v.  Cotton                    279 
Watson  V.  Avery                         267 
V.  Garvin            214,  217,  262 
V.  Jones                 257,  261,  268 
V.  Scranton  Trust  Co.          161 
Waugh  V.  Andel                           311 
Weaver  v.  Fisher  48 
V.  Trustees,  etc.  Canal  96 
Webb  V.  Drake                            287 
V.  Vt.  Cent.  Ry.  Co.            166 
Webster  v.  Vanderventer           243 
Weed  V.  Ciuning                          176 
Weir  V.  Met.  St.  Ry.  16 
Weiss  V.  Musical  Union      219,  225, 

226 

Weld  V.  May  200,  240 

V.  Ohver  194 

W^eUs  V.  Gates  38,  98,  135 

V.  Murray  119 

V.  Turner  281 

V.  Wilson  109 

Wells-Stone  Mercantile  Co. 

V.  Grover  152 

Werner  v.  Leisen  121 

W^estbrook  v.  Griffin  310 

Westcott  V.  Fargo  14,  17,  103 

Western    Penn.    Hospital   v. 

Mercantile  Co.  167 

Wheelock  v.  Chapman  180 

\^Tieelwright  v.  St.  Louis  Co.     167 
While  V.  Damon  220 

Wliipple  V.  Parker  26 

Whitcomb  v.  Smart  311 

White  V.  BrowneU     200,  217,  225, 

250 

V.  Howard  247 

V.  Parks  282 

Whitehouse  v.  Sprague  102 

White  Lick,  etc.  Friends  v. 

WTiite  Lick,  etc.  Friends        259 
Whitman  v.  Porter        41,  43,  122, 

123 

Whitney  v.  Backus  19 

V.  Mayo  309 

Whitty  V.  McCarthy  233 


XXV 


TABLE  OF  CASES 


PAGE 

Wicks  V.  Nedrow  268 

Wiggin  V.  Knights  of  Pythias    272 

Wilhehn  v.  Byles  151 

Wilkinson  v.  Evans  22 

Willard  V.  WiUard  197 

Willcox  V.  Arnold  278 

WiUiams  v.  Boston       42,  43,  52, 

72,  141,  316,  329,  342 

V.  Church  242 

V.  Johnson     47,  59,  316,  317, 

342 

V.  Michigan  Bank  95 

V.  Milton     47,  49,  62,  72,  76, 

316,  317,  342 

Williamson  v.  Randolph  219 

Willis  V.  Chapman        28,  91,  119, 

121 

V.  Greiner  92 

V.  Sharp  160 

Wilhner's  Estate,  Re      3,  14,  142 

Willoughby  v.  Hildreth  9 

Wilson  V.  Curzon  26 

V.  Ohver  111 

Wmdham  v.  Ulmer  260 

Windley  v.  McCliney  234 

Winona  Lumber  Co.  v.  Church  276 

Winslow  V.  Minn.,  etc.  R.  R.      165 

Winter  v.  Hamm  312 

Winthrop  v.  Att'y  Gen.  167 

Wise  V.  Perpetual  Trustee  Co.  271, 

274,  277 

Witherhead  v.  Allen  17 


PAGE 

Witmer  v.  Schlatter  130 

Witthaus     V.     St.     Thomas 

Church  246 

Woddrop  V.  Weed  158,  160 

Wolfe  V.  Linestone  Coimcil     243, 

281 
Wood  V.  Finch  276,  280 

V.  Wood  220 

Woods  V.  De  Figaniere  14 

Worcester  Company,  Re  136 

Worcester    Corn    Exchange 

Company's  Case  93,  126 

Workingmen's  Bank  v.  Con- 
verse 307 
Wright  V.  Railroad  157,  158 
V.  SwajTie  82 
Wright's  Estate  161 
Wylly  V.  Collins                           160 

Yarj-an  Co.  v.  Penn.  Glue 
Co.  22 

Yeaman  v.  Galveston  City 
Co.  106,  137 

Yeaton  v.  Somersworth 
Grange  230 

York  V.  Pease  275 

Young  V.  Haviland  166 

Zehnbar  v.  Spillman  164 
ZiUifax  V.  I.  O.  F.  225 
Zonne  v.  Minneapohs  Syndi- 
cate 71 


XXVI 


UNINCORPORATED 
ASSOCIATIONS 

CHAPTER   I 

INTRODUCTION 

§  1.  Definition 

The  term  "  association"  has  not  acquired  a  technical 
legal  meaning  which  can  safely  be  stated  in  the  form  of 
a  definition.  In  the  philosophy  of  the  law  it  has  been 
used  sometimes  to  describe  all  cohesive  groups  of  in- 
dividuals whether  or  not  endowed  by  the  State  with 
the  conception  of  artificial  entity.  Regardless  of  the 
theoretical  soundness  of  this  terminology/  in  entitling 
a  book  devoted  to  unincorporated  groups  long  usage 
seems  to  require  the  addition  of  the  limiting  participle 
to  the  word  "association."  The  word  ''voluntary" 
which  has  been  most  often  employed  for  this  purpose 
seems  inappropriate  in  this  connection  in  modern  Eng- 

1  "Philosophy  may  have  gained  by  the  attempts  in  recent  years  to 
look  through  fiction  to  the  fact  and  to  generalize  corporations,  partner- 
ships and  other  groups  into  a  single  conception.  But  to  generahze  is 
to  omit,  and  in  this  instance  to  omit  one  characteristic  of  the  modern 
corporation  as  called  into  being  under  modern  statutes  that  is  most 
important  in  business  and  law.  A  leading  purpose  of  such  statutes 
and  of  those  who  act  under  them  is  to  interpose  a  non-conductor  through 
which  in  matters  of  contract  it  is  impossible  to  see  the  men  behind." 
Holmes,  J.,  in  Donnell  v.  Herring  Co.,  208  U.  S.  267,  273,  52  L.  ed. 
481,  28  S.  Ct.  288.  See  also  Merchants  National  Bank  v.  Wehrmann, 
202  U.  S.  295,  300,  50  L.  ed.  1036,  26  S.  Ct.  613,  and  "The  Law  of 
Associations,  Corporate  and  Unincorporate,"  Herbert  A.  Smith,  Ox- 
ford, 1914. 

1 


§  1]  INTRODUCTION  [Chap.  I 

lish,  for  incorporators  act  under  no  compulsion.  Hence 
the  words  ''unincorporated  associations"  will  be  used 
herein. 

As  used  in  statutes  the  word  ''associations"  has  been 
held  to  include  both  incorporated  and  unincorporated 
groups.^  When  used  in  statutes  in  connection  with  the 
word  "company"  the  words  have  sometimes  been 
held  sjTionymous.^  In  interpreting  other  statutes  the 
word  has  been  held  to  mean  something  different  from 
a  corporation  ^  and  again  something  distinct  from  a 
partnership.^  Apart  from  interpretations  of  statutes 
not  particularly  concerned  with  this  distinction  most 
courts  formerly  held  that  in  business  enterprises  there 
is  no  intermediate  stage  between  partnership  and  cor- 
poration.^    In  more  recent   cases  a  tendency  seems 

2  U.  S.  V.  Trinidad  Coal,  etc.  Co.,  137  U.  S.  160,  169,  34  L.  ed.  640 
11  S.  Ct.  57. 

3  Lee  Mut.  F.  Ins.  Co.  v.  State,  60  Miss.  395,  398. 

*  State  V.  Steele,  37  Minn.  428,  430,  34  N.  W.  903.  See  also  Adams 
Express  Co.  v.  Schofield,  111  Ky.  832,  836,  64  S.  W.  903. 

A  statute  providing  for  sale  of  pledged  shares  of  corporations  was 
held  not  to  apply  to  shares  of  unincorporated  associations  (real  estate 
trust).     Linncll  v.  Leon,  206  Mass.  71,  91  N.  E.  895. 

6  Laycock  v.  State,  136  Ind.  217,  228,  36  N.  E.  137;  Base  Ball  Assoc. 
V.  Chib,  75  N.  Y.  S.  1076;  Richardson  v.  Harsha,  22  Okla.  405,  420,  98 
Pac.  897;  Osborne  v.  Holland,  1  Tex.  App.  Civ.  Cas.,  §  1087. 

So  in  interpreting  the  words  "unincorporated  company"  in  the 
United  States  Bankruptcy  Act  it  was  held  that  an  involuntary  peti- 
tion might  be  filed  against  a  Lloyds  Insurance  Association  as  such. 
Re  Seaboard  Fu-e  Underwriters,  137  Fed.  987  (D.  C.  —  N.  Y.).  The 
same  rule  was  applied  to  a  real  estate  trust.  Re  The  Associated  Trust, 
222  Fed.  1012  (D.  C.  —  Mass.). 

«  People  V.  Rose,  219  111.  46,  .59,  76  N.  E.  42;  Thomas  v.  Dakin,  22 
Wend.  9,  69;  Niagara  County  v.  People,  7  Hill  .504,  .507. 

The  rule  that  for  purposes  of  jurisdiclion  of  courts  of  the  United 
States  a  suit  by  or  against  a  con)()rat,ioii  in  its  c^orjiorate  name  is  con- 
clusively presumed  to  b(!  against  citizens  of  th<>  State  creating  the  cor- 
poration is  not  a])i)li(!d  to  joint  stoc^k  c()mi)aBies  organizcnl  under  the 
Htatute  of  New  York.  Chapman  v.  Barney,  129  U.  S.  677,  682,  32  L. 
ed.  800,  9  S.  Ct.  426;  or  limited  j)artnerslii])  associations  organized 
under  the  Ht!itut(i  of  PenriHylvjiniii.  (Ireat  Soutliern  Co.  v.  .Jones,  177 
U.  S.  449,  4.54;  44  L.  cd.  842,  20  S.  Ct.  690.   See  post,  §  12,  note  14. 

2 


Chap.  I]  DEFINITION  [§  1 

discernible  towards  establishing  such  an  intermedi- 
ate organization.^  When  associations  have  been 
regulated  by  statute,  courts  have  had  much  diffi- 
culty in  distinguishing  them  from  corporations.^  The 
term  has  been  applied  to  small  as  well  as  to  large 
groups  of  individuals,  but  it  is  usually  and  most 
properly  applied  to  many  persons  acting  together 
through  officers  or  agents  in  the  prosecution  of  im- 
portant enterprises.^ 

7  See  §  12,  note  5. 

^  "Family"  of  Shakers  apparently  mcorporated  by  peculiar  statute. 
Pease  v.  Pease,  35  Conn.  131. 

An  association  filing  articles  under  a  statute  regulating  voluntary 
associations  became  a  corporation  and  could  sue  as  such  on  a  subscrip- 
tion contract.  Mullen  v.  Beach  Grove  Driving  Park,  64  Ind.  202, 
206. 

Indictment  defective  that  alleged  larceny  from  the  American  Ex- 
press Company  without  alleging  it  was  a  corporation  or  an  association 
formed  under  the  statute  making  it  so  far  an  entity  that  it  can  hold 
property  or  alleging  the  names  of  partners.  People  v.  Brander,  244 
111.  26,  31,  91  N.  E.  59. 

Adams  Express  Company  held  to  have  enough  of  the  quaUties  of 
a  partnership  to  subject  it  to  hability  in  New  Jersey  as  an  unincor- 
porated association.  Saunders  v.  Adams  Express  Co.,  71  N.  J.  L.  520,  58 
Atl.  1101.  See  U.  S.  v.  Adams  Express  Co.,  229  U.  S.  381,  390,  57  L.  ed. 
1237,  33  S.  Ct.  878. 

"A  corporation  has  artificial  entity;  a  joint  stock  company,  though 
it  has  some  of  the  rights  of  corporations,  cannot  exist  as  an  entity  dis- 
tinct from  its  members."  "Even  if,  unUke  a  partnership  which  it 
really  is,  it  can  be  said  to  exist  as  an  artificial  being,  it  owes  its  exist- 
ence not  to  the  State  but  to  the  contract  of  its  members  and  may  be 
said  to  exist  wherever  it  does  business  or  owns  property.  In  that 
sense  the  analogy  to  a  corporation  is  to  one  organized  under  the  laws 
of  two  or  more  States."  Re  Wilhner's  Estate,  138  N.  Y.  S.  649,  153 
App.  Div.  804. 

"It  is  a  quasi  corporation.  Its  members  are  not  partners."  Storebe 
V.  Albert,  1  N.  Y.  City  Court,  376. 

"A  partnership  with  some  of  the  powers  of  a  corporation."  Van 
Hernan  v.  Bleistein,  102  N.  Y.  360,  7  N.  E.  537;  People  v.  Coleman, 
133  N.  Y.  279,  31  N.  E.  96. 

Shares  in  a  joint  stock  association  owned  by  a  deceased  resident  of 
New  York  are  personal  property  and  taxed  at  full  value  though  part 
of  the  assets  of  the  association  was  real  estate  which  if  it  had  descended 
to  the  heirs  of  the  deceased  would  have  been  exempt.  Re  Jones,  172 
N.  Y.  575,  65  N.  E.  570.     See  §  9,  note  2. 

9  Mills  V.  State,  23  Tex.  295,  304. 

3 


§  2]  INTRODUCTION  [Chap.  I 

One  reason  for  the  uncertainty  of  the  courts  is  the 
fact  that  the  term  is  applicable  to  two  very  different 
sorts  of  groups  as  will  appear  from  the  following  at- 
tempt at  classification. 

§  2.   Classification 

Individuals  acting  in  groups  without  a  charter  of 
incorporation  from  the  State  may  be  classified  as  those 
whose  purpose  is  pecuniary  profit  and  those  whose 
purpose  is  not  pecuniary  profit.  They  may  also  be 
divided  into  those  groups  in  which  there  is  the  element 
of  association  or  cooperation  and  those  in  which  the 
units  in  the  main  act  individually.  These  two  classifi- 
cations are  not  mutually  exclusive,  nor  are  their  char- 
acteristics sharply  defined.  Indeed,  considering  the 
early  period  at  which  these  questions  began  to  come 
before  the  courts,  the  rules  of  law  applicable  to  all  such 
groups  are  still  surprisingly  vague.  Classification  along 
the  lines  above  indicated  will  aid,  however,  in  syste- 
matizing the  law.  The  following  is  an  attempt  at  such 
classification: 

I 
Groups  classified  according  to  pecuniary  purpose. 

A.  Those  whose  object  is  profit. 

1.  Associations  for  Profit  or  Partnerships. 

(a)  Informal  Associations. 

(b)  Mining  Partnerships. 

(c)  Statutory  Joint  Stock  Associations. 

(d)  Defective    Incorporations    (in   most 

States) . 
Co)  Formal  Associations. 

2.  Trusts. 

4 


Chap.  I]  LAW  APPLICABLE  [§  3 

3.  Unassociated  Groups. 

(a)  Dealers  through  a  Common  Agent. 

(b)  Syndicates    Underwriting    Securities 

(usually) . 

(c)  Lloyd's  Insurers  (usually). 

(d)  Defective    Incorporations    (in   some 

States) . 

(e)  Tenants  in  Common. 

B.  Non-Profit  Associations. 

1.  Social  Clubs. 

2.  Fraternal  Orders. 

3.  Benefit  Societies. 

4.  Temporary  Local  Organizations. 

5.  Religious  Societies. 

6.  Professional  Societies. 

7.  Farmers'  Telephone  Lines. 

8.  Socialistic  Communities. 

9.  Stock  Exchanges. 

10.  Trade  Unions  and  Employers'  Associations. 

II 

Groups  classified  according  to  cohesion. 

C.  Those  which  have  the  element  of  association. 

No.  1  of  Group  A,  supra,  and  all  of  B. 

D.  Those  without  an  element  of  association. 

No.  2  and  No.  3  of  Group  A,  supra. 

§  3.  Law  Applicable 

The  problem  with  reference  to  all  of  these  groups 
is  the  application  to  them  of  principles  of  law  origi- 
nally developed  with  respect  to  relations  between  two  or 
three  individuals,  in  the  first  class  the  law  of  partner- 
ship, in   the   second  class   the   law  of   trusts,  in  the 

5 


§  3]  INTRODUCTION  [Chap.  I 

remaining  classes  the  law  of  agency.  Corporations, 
having  been  recognized  from  the  start  as  possessing 
individuality  under  the  fiction  of  artificial  personality, 
were  able  to  develop  a  law  very  much  their  own.  Un- 
incorporated groups  have  developed  hampered  by 
rules  of  law  which  seem  logically  applicable,  yet  rules 
which  had  been  formulated  with  slight  regard  to  the 
problems  presented  by  individuals  in  the  aggregate. 
The  ingenuity  of  modern  draftsmen  has  done  much  to 
reUeve  unincorporated  groups  of  legal  restrictions 
hindering  their  growth,  but  these  documents  themselves 
have  created  new  conundrums  as  yet  unanswered. 

As  previously  stated  a  distinct  tendency  is  notice- 
able both  in  statute  and  decision  to  treat  associations 
for  profit  as  organizations  intermediate  between  part- 
nerships and  corporations.  Such  classification  will  tend 
to  develop  for  them  a  law  of  their  owti.  Though  to  some 
extent  these  dicta  have  been  due  to  loose  reasoning, 
statutory  recognition  of  the  situation  gives  to  the  more 
recent  of  them  a  position  of  authority.  The  importance 
of  the  interests  involved  in  these  modern  cases  seems  to 
justify  fully  the  classification  which  we  see  developing. 

Another  attempt  by  the  courts,  encouraged  by  the 
digesters,  to  create  a  new  legal  relation  is  the  use  in 
recent  cases  of  the  term  ''joint  adventure."  In  almost 
every  instance  where  this  term  has  been  applied  the  rela- 
tion in  fact  was  that  of  partnership  and  the  court  has 
applied  the  ordinary  rules  of  partnership  called  for  by 
the  facts  though  using  this  new  term  as  though  the 
relation  was  not  that  of  partnership.  So  far  as  the 
courts  seem  to  have  had  a  distinction  in  mind  they 
have  applied  this  term  to  partnerships  formed  to  en- 
gage in  a  single  transaction  instead  of  in  a  series  of 

6 


Chap.  I]  MODERN  TENDENCIES  [§  4 

transactions  such  as  constitute  the  business  of  an 
ordinary  commercial  partnership.  These  cases  have 
usually  involved  only  a  few  individuals  and  so  do  not 
particularly  concern  this  treatise.  In  an  important 
recent  decision,  however,^  the  term  has  been  applied 
to  a  syndicate  of  numerous  members  of  the  sort  that 
has  frequently  been  held  a  partnership.  In  the  case  in 
question  the  syndicate  was  held  not  a  partnership  but 
a  "joint  venture"  and  the  court  expressed  an  inclina- 
tion not  to  apply  to  it  all  the  ordinary  rules  of  part- 
nership. It  would  seem  that  the  court  had  in  mind 
either  the  sort  of  relation  which  is  herein  described  as 
an  Unassociated  Group  or  what  was  really  a  Trust.^ 

§  4.  Modern  Tendencies 
One  of  the  surprises  of  recent  law  has  been  the  re- 
flection in  the  decisions  of  the  courts  of  a  revival  of  in- 
terest among  business  men  in  unincorporated  associa- 
tions. Taxation  and  inquisitorial  legislation  affecting 
corporations  has  driven  many  concerns  to  what  might 
seem  a  more  primitive  form  of  business  organization. 
In  certain  States,  notably  Massachusetts,  where  local 
legislation  of  long  standing  had  forced  such  develop- 
ments earlier  than  elsewhere,  these  associations  have 
been  developed  to  a  high  degree  of  effectiveness.  The 
attention  attracted  by  their  success  foreshadows  a 
similar  tendency  in  other  States.  The  newest  law  to- 
day concerns  the  application  of  old  principles  to  the 
new  problems  created  by  associations  for  profit.  It 
seems  well,  therefore,  to  begin  by  a  consideration  of 
the  nature  of  this  form  of  group,  its  distinction  from 
other  similar  groups  and  the  law  applicable  to  it. 

1  Jones  V.  Gould,  209  N.  Y.  419,  424,  426,  103  N.  E.  720. 

2  See  §  50,  note  3. 

7 


CHAPTER   II 

ASSOCIATIONS   FOR   PROFIT 

§  5.   Early  Companies 

Associations  for  profit  or  partnerships  take  differ- 
ent forms  according  as  they  have  developed  from 
different  sources.  One  of  the  earhest  forms  was  the 
large  trading  partnership  with  transferable  shares 
which  was  the  direct  progenitor  of  the  modern  busi- 
ness corporation.^  These  grew  out  of  small  part- 
nerships and  were  treated  as  partnerships  from  the 
start.  The  consequences  to  the  holders  of  these 
shares  of  the  failure  of  speculative  ''bubbles"  and 
the  subsequent  restrictive  legislation^  led  for  a  time 
to  their  abandonment  and  caused  the  substitution 
of  corporations. 

§  6.  Informal  Associations  for  Profit 

A  primitive  kind  of  association  for  profit  is  that  de- 
veloped from  the  social  club,  the  somewhat  informal 
organization  with  constitution  and  by-laws  setting 
forth  the  mutual  rights  and  obligations  of  the  members.^ 
What  makes  such  groups  partnerships,  unlike  their 
progenitor,  the  social  club,  is  their  purpose,  viz.,  the 

•  "  Whore  men  associate  themselves  together  and  conduct  a  general 
business  under  a  common  name  and  do  not  incorporate  the  association 
uriflcr  tlif  laws  of  tlio  State,  they  may  be  deemed  partners."  Love  v. 
lilair,  72  Ind.  2S1,  2S2. 

2  In  I':nKland,  the  so-called  "Bubble  Act."     6  Geo.  I  c.  18. 

'  Tyrrell  v.  Washburn,  6  Allen  466;  Ashley  v.  Dowling,  203  Mass. 
311,  317,  8'J  N.  K.  434. 

8 


Chap.  IIJ     INFORMAL  ASSOCIATIONS  FOR  PROFIT         [§  6 

pecuniary  gain  of  the  members  in  some  sort  of  busi- 
ness.^ 

During  the  middle  of  the  last  century  a  craze  seems 
to  have  swept  the  United  States  for  the  organization 
of  cooperative  stores,  chiefly  among  farmers  wholly 
unacquainted  with  store-keeping.  The  vicissitudes  of 
these  organizations  furnish  many  decisions  on  the 
application  of  the  law  of  partnership  to  associations.^ 
Communistic  societies  are  properly  held  non-profit 
associations,  but  in  one  case  the  Supreme  Court  of  the 
United  States  referred  to  one  as  a  partnership.^  Farm- 
ers' telephone  lines  are  a  recent  variety  of  cooperative 
organization,  usually  of  the  most  informal  character. 
They  are  usually  and,  it  is  submitted,  properly  held 
non-profit  associations,  but  one  such  association  was 
held  not  a  commercial  partnership,  but  a  non-trading 
partnership.^  The  law  relating  to  non-profit  associa- 
tions is  discussed  hereafter  in  Chapter  V. 

2  Regina  v.  Robson,  L.  R.  16  Q.  B.  D.  137. 

'  "Their  constitution  is  quite  full  and  minute  in  establishing  rules 
fit  for  a  debating  society,  but  wholly  silent  upon  points  the  most  vital 
to  their  pecuniary  welfare."    Henry  v.  Jackson,  37  Vt.  431. 

A  cooperative  store  was  held  not  a  partnership,  and  hability  of  mem- 
bers was  held  to  depend  on  the  principle  of  agency.  Davison  v. 
Holden,  55  Conn.  103,  112,  10  Atl.  515. 

What  seems  to  have  been  a  cooperative  store  was  held  not  a  partner- 
ship "as  between  themselves"  because  they  understood  their  habihty 
was  hmited  to  their  subscriptions.  McDonald  v.  Fleming,  178  Mich. 
206,  144  N.  W.  519. 

Evidence  held  insufficient  to  show  that  a  Farmers'  League  owned  a 
cooperative  cash  store.  Willoughby  v.  Hildreth,  182  Mo.  App.  80,  167 
S.  W.  639. 

*  Goesele  v.  Bimeler,  14  How.  589,  607.  See  contra,  Teed  v.  Parsons, 
202  111.  455,  460,  66  N.  E.  1044.     See  §  54,  note  7. 

^  In  which  partners  have  no  impUed  power  to  borrow  on  the  credit 
of  the  fii-m.  The  court,  however,  proves  the  unsoundness  of  its  own 
reasoning  by  treating  social  clubs  and  lodges  as  in  this  same  class. 
Schumaker  v.  Sumner  Tel.  Co.,  161  la.  326,  142  N.  W.  1034.  See  §  54, 
note  8. 


§  7]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

§  7.   Mining  Partnerships 

One  form  of  partnership  which  has  seldom  been  rec- 
ognized as  a  true  association,  but  treated  rather  as  an 
isolated  exception  to  the  rules  of  ordinary  partner- 
ship, is  the  so-called  ''mining  partnership."  ^  Com- 
panies formed  to  operate  mines  appear  in  English  cases 
in  the  esirly  part  of  the  last  century  -  before  the  discov- 
ery of  the  mineral  wealth  in  our  West.  These  companies, 
like  most  joint  stock  companies  of  the  day,  had  trans- 
ferable shares,  though  they  were  not  always  represented 
in  formal  organizations  with  certificates  of  stock. 
From  the  fact  that  these  shares  were  full}"  transferable, 
that  is,  that  the  rule  of  ordinary  partnerships  known 
as  delectus  personae  did  not  apply,  certain  other  excep- 
tions to  the  usual  rules  of  partnership  were  also  estab- 
lished at  an  early  date.^  It  would  seem  more  likely  that 
these  doctrines  were  applicable  to  all  associations  than 
that  they  were  peculiar  to  the  law  of  mines.  They 
were  taken  up,  however,  in  our  western  States  when 
their  courts  began  to  decide  mining  litigation  and 
rapidly  developed  into  an  arbitrary  exception  to  the 
law  of  ordinary  partnership  and  not  limited  to  true 
associations.  The  doctrine  has  been  applied  to  oil 
drilling  proprietors  ^  and  to  some  extent  to  proprietors 
of  irrigation  ditches.^  This  mining  partnership  law 
soon  became  crystallized  in  the  codes.  Attention  will 
be  called  hereafter  to  the  relation  this  law  bears  to. that 
of  other  associations  for  profit. 

1  See  §  17,  note  5. 
«  See  §  26,  note  4. 

*  See  §  22,  notes  2  and  6,  and  §  26,  note  6. 

*  See  §  17,  note  5. 
»  See  §  17,  note  7. 

10 


Chap.  II]  SYNDICATES  [§  8 

§  8.   Syndicates 

Syndicates  and  ''pools,"  formed  sometimes  under 
elaborate  agreements,  sometimes  in  the  most  infor- 
mal way,  usually  for  the  purpose  of  speculation  in 
securities  or  commodities,  are  more  modern  organ- 
izations that  have  sometimes  been  deemed  partner- 
ships^ and  sometimes  merely  joint  contractors  or  un- 

^  On  a  bill  to  cancel  a  conveyance  for  fraud.  Held:  "The  Hogg- 
Swayne  Syndicate  was  a  private  association  whose  members  had  nego- 
tiable shares  and  interests  varying  as  sales  and  purchases  of  respec- 
tive interests  took  place;  but  as  a  partnership  it  bought  and  sold  the 
Snow  title  and  all  the  members  thereof,  defendants  herein,  are  Uable 
as  partners  for  the  proceeds  of  the  Snow  interest  coming  into  the  hands 
of  the  Syndicate."  One  of  the  defendants  bought  in  after  the  contract 
of  purchase  now  rescinded.  Snow  v.  Hazelwood,  179  Fed.  182,  185 
(C.  C.  A. —  Tex.). 

Held  on  the  evidence  that  a  note  signed  by  syndicate  managers 
was  the  note  of  the  syndicate  and  not  their  personal  note  and  that  it 
had  been  paid  by  plaintiff  becoming  a  subscriber  to  the  syndicate  to 
that  extent.  This  was  a  syndicate  to  buy  securities  of  two  railroads 
and  combine  them  and  issue  new  securities  to  members  of  the  syndicate. 
Continental  Nat.  Bank  v.  Heilman,  81  Fed.  36,  41. 

"Now  a  syndicate,  according  to  the  undisputed  evidence,  is  an 
association  of  individuals  formed  for  the  pin-pose  of  conducting  and 
carrying  out  some  particular  business  transaction,  ordinarily  of  a 
financial  character,  in  which  the  members  are  mutually  interested.  It 
is  as  respects  the  persons  composing  it  a  partnership  and  in  so  far  as 
these  same  persons  are  concerned  the  legal  obhgations  assumed  by 
them  are  as  between  themselves  substantially  the  same  as  those  which 
the  law  imposes  on  the  members  of  an  ordinary  co-partnership." 
Hambleton  v.  Rhind,  84  Md.  456,  487. 

A  syndicate  agi-eement  for  the  piu"chase,  sale  and  ultimate  division 
of  certain  stock  was  settled  by  a  distribution  of  the  stock.  One  of  the 
signers  now  seeks  to  reopen  the  settlement  on  the  ground  that  the 
managers  violated  their  duty  in  operating  on  their  own  account. 
Held:  Cannot  reopen  the  account  with  the  other  partners  for  fault  of 
the  managers.  His  right  is  against  the  managers.  Boody  v.  Drew,  46 
How.  Pr.  459. 

The  famous  partnership  case  of  Pooley  v.  Driver,  5  Ch.  D.  458, 
really  involved  an  unincorporated  association.  A  statute  had  been 
passed  called  Lord  Bovill's  Act,  providing  that  one  who  loaned  money 
to  a  firm  in  consideration  of  a  share  in  the  profits  should  not  be  deemed 
a  partner.  The  owners  of  a  business  made  agreements  with  a  group  of 
investors  purporting  to  provide  for  a  series  of  separate  loans  to  the 
firm  to  take  advantage  of  this  statute.  The  agreements  provided  that 
the  firm  should  use  the  money  loaned  in  the  business  and  not  draw  it 

11 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

associated  groups.^  In  their  most  artistic  form  they 
are  probably  really  trusts.  No  general  rule  can  be  laid 
down,  for  the  forms  taken  by  syndicates  are  varied  and 
the  legal  relation  of  the  members  depends  on  the  facts 
of  the  particular  case.  Similar  to  these  syndicates  are 
the  organizations  of  individual  insurance  underwriters 
usually  called  ''Lloyd's."  When  skilfully  organized 
these  are  not  partnerships  and  are  therefore  discussed 
more  fully  hereafter.^  In  some  instances,  however, 
they  are  formed  under  articles  of  association  giving  the 
associates  considerable  powers  of  control  over  the  man- 
agement of  the  business  by  the  attorney  and  in  actions 
other  than  those  upon  their  policies  of  insurance  they 
have  therefore  been  properly  held  partnerships.'* 

§  9.   Statutory  Joint  &tock  Associations 

In  some  States  elaborate  forms  of  associations  for 
profit  are  organized  under  statutes  which  make  them 
almost,  if  not  quite,  corporations.  In  New  York, 
Pennsylvania  and  Michigan  such  statutory  organiza- 
tions have  been  largely  employed  in  business  enterprises. 
In  New  York  in  particular,  this  form  of  organization, 
there  called  a  joint  stock  association,^  proved  so  satis- 

out.  The  court  held  that  it  was  really  a  device  to  avoid  liability  and 
not  a  real  loan  and  that  the  contributors  were  partners. 

A  combination  of  more  than  twenty  persons  formed  on  the  prin- 
ciple of  investing  the  subscriptions  of  the  members  and  dividing  the 
capital  fund  and  profits  among  themselves  by  means  of  certificates 
convert  il)l(!  by  annual  drawings  by  lot  into  preference  dividend  bonds 
bearing  interest  with  a  bonus  was  held  an  association  for  the  acquisi- 
tion of  gain  and  so  illegal  because  not  registered.  Sykes  v.  Beedon,  L. 
R.  11  Ch.  D.  170,  189. 

»  See  §  m.  3  See  §  49.  *  See  §  49. 

'  Thi.s  term  is  one  of  the  earliest  applied  to  business  associations 
with  transferable!  shares  and  for  a  time  continued  to  be  used  after 
these  ,'i.s80ciations  began  to  be  incorj)orated.  "Joint  stock  company" 
in   early   Massachusetts  statutes  was  equivalent  to  corjjoration  or- 

12 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

factory  that  all  the  great  express  companies  were  or- 
ganized under  it  in  preference  to  the  general  law  author- 
izing incorporation. 

The  New  York  judges  themselves  have  been  uncer- 
tain as  to  the  proper  classification  of  these  associations, 
but  the  later  decisions  seem  to  hold  that  they  are  not 
corporations  and  are  therefore  partnerships.^     When 

ganized  under  general  laws.  Attorney  General  v.  Mercantile  Co.,  121 
Mass.  524. 

2  Issue  whether  a  New  York  statute  taxing  corporations  applied  to 
joint  stock  companies  organized  under  statute.  Held:  Original  statute 
allowing  suit  against  and  by  president  or  the  association  expressly 
declared  they  were  not  corporations  and  though  recent  statutes  have 
given  them  nearly  all  the  attributes  of  corporations  they  have  not 
obliterated  that  distinction.  The  distinction  is  that  the  creation  of  a 
corporation  merges  in  it  the  individual  rights  and  habihties  of  the 
members,  but  the  organization  of  a  joint  stock  company  leaves 
those  in  full  force  (p.  284).  "We  can  say  as  we  did  say  in  Van 
Aernam  v.  Bleistein,  102  N.  Y.  360,  7  N.  E.  537,  that  a  joint  stock 
company  is  a  partnership  with  some  of  the  powers  of  a  corporation" 
(p.  287).  People  ex  rel.  Winchester  v.  Coleman,  133  N.  Y.  279,  31 
N.  E.  96. 

Shares  in  a  joint  stock  association  owned  by  a  deceased  resident  of 
New  York  are  personal  property  and  taxed  at  full  value,  though  part 
of  the  assets  of  the  association  were  real  estate  which  if  it  had  de- 
scended to  the  heu's  of  the  deceased  would  have  been  exempt.  Re 
Jones,  172  N.  Y.  575,  65  N.  E.  570. 

But  see  opinion  of  O'Brien,  J.,  in  Hibbs  v.  Brown,  190  N.  Y.  167, 
82  N.  E.  1108. 

Statute  authorizing  action  against  president  of  unincorporated 
associations.  President  was  defendant  and  jurisdiction  determined 
by  his  residence.  Adams  Express  Company  is  a  partnership  (citing 
cases).  Brooks  v.  Dinsmore,  15  Daly  (N.  Y.)  428,  8  N.  Y.  S.  103,  28 
N.  Y.  St.  421,  18  N.  Y.  Civ.  Proc.  98.  Ace.  Bacon  v.  Dinsmore,  42 
How.  Pr.  (N.  Y.)  368. 

A  voluntary  association  under  New  York  statutes  is  a  quasi  cor- 
poration. Members  are  not  partners.  It  may  be  sued  by  a  member 
and  it  mav  sue  a  member.  Hence  president  may  sue  treasurer  for  its 
funds.     Strebe  v.  Albert,  1  N.  Y.  City  Ct.  376. 

The  decedent,  a  resident  of  New  Jersey,  owned  shares  in  a  New 
York  joint  stock  association.  Held:  They  are  liable  for  a  transfer  tax 
on  the  proportion  of  their  value  which  the  property  within  the  State 
bore  to  the  entire  property  of  the  association.  "The  distinction  be- 
tween a  coi*poration  and  a  joint  stock  association,  as  concerns  the 
point  for  decision,  is  that  a  corporation  is  an  artificial  entity  existing 
in  contemplation  of  law  in  the  State  of  its  creation.  It  can  have  no 
existence  elsewhere  and  is  recognized  in  other  jurisdictions  only  by 

13 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

these  associations  have  come  before  the  courts  in  other 
jurisdictions  divergence  of  opinion  has  resulted  as  to 

comity.  It  is  a  citizen  within  the  meaning  of  certain  provisions  of  the 
Federal  Constitution.  Whereas  a  joint  stock  association,  though  it 
have  some  of  the  rights  of  a  corporation  and  may  sue  and  be  sued  in 
the  name  of  its  president,  stiU  does  not  exist  as  an  entity  distinct  from 
its  members.  .  .  .  Even  if,  unhke  a  partnership,  which  it  really  is,  it 
can  be  said  to  exist  as  an  artificial  being,  it  owes  its  existence  not  to 
the  State  but  to  the  contract  of  its  members  and  may  therefore  be  said 
to  exist  wherever  it  does  business  or  owns  property.  In  that  sense  its 
analogy  to  a  corporation  is  to  one  organized  under  the  laws  of  two  or 
more  States."  Re  Wilkner's  Estate,  138  N.  Y.  S.  649,  153  App.  Div. 
804. 

Shareholders  in  a  joint  stock  association  whose  articles  give  the 
directors  power  to  dissolve  it  cannot  object  to  such  dissolution  and  sale 
of  its  assets  on  the  theory  that  it  is  a  corporation  because  People  v. 
Coleman  decided  it  was  not.  Francis  v.  Taylor,  65  N.  Y.  S.  28,  52  App. 
Div.  631. 

An  officer  of  a  joint  stock  company  cannot  refuse  to  produce  docu- 
ments in  his  custody  when  subpoenaed.  It  is  not  a  corporation.  Woods 
V.  De  Figaniere,  24  N.  Y.  Super.  Ct.  659. 

Many  of  the  earlier  cases,  however,  treated  them  Like  corporations. 
Sandford  v.  Supervisors,  15  How.  Pr.  172. 

In  a  controversy  between  a  shareholder  and  the  company  it  is  not 
to  be  considered  a  partner,  but  the  controversy  must  be  decided  on 
the  analogy  of  corporations.  Waterbury  v.  Merchants  Co.,  50  Barb. 
157. 

An  action  on  a  liabihtj^  of  the  company  may  be  maintained  by  a 
shareholder.  For  pvuposes  of  action  the  officer  sued  is  a  corporation 
Bole.     Westcott  v.  Fargo,  61  N.  Y.  542. 

They  are  taxable  under  the  act  taxing  corporations.  They  must  be 
deemed  to  be  incorporated.  People  v.  Wemple,  117  N.  Y.  136,  22  N.  E. 
1046. 

It  is,  like  a  corporation,  a  citizen  of  New  York  for  purposes  of  re- 
moval to  United  States  courts.  Fargo  v.  McVicar,  55  Barb.  437;  INIaltz 
V.  American  Express  Co.,  1  Flip.  611  (C.  C.  —  Mich.);  Fargo  n. 
L.  N.  A.,  etc.  Co.,  6  Fed.  787  (C.  C.  —  Ind.). 

Whether  or  not  a  corporation,  the  right  to  sue  the  shareholders  aa 
individuals  is  preserved.     Mooro  v.  Brink,  4  Hun  402,  404. 

Under  a  statute  authorizing  an  executor  to  deliver  property  in 
specie  instead  of  selling  it,  shares  in  a  joint  stock  company  may  be  de- 
livered. The  interest  of  the  testator  was  like  that  of  a  shareholder  in 
a  corporation.  He  could  di.spose  of  the  shares  by  will  in  spite  of  a  pro- 
vision in  the  articles  requiring  offer  to  the  company  before  sale.  Lane 
V.  Alhcrtson,  79  N.  Y.  S.  947,  953,  7S  App.  Div.  607. 

Shareholders  in  a  joint  stock  association  have  the  same  rights  as 
stockholders  in  a  cor])oration  to  examine  the  books,  l)ut  a  prerequisite 
to  granting  nianchinuis  for  that  purpose  is  that  the  officers  after  a  rca- 
Honabie  time  refu.se.  Re  Hatt,  lOS  N.  Y.  S.  468.  See  U.  S.  v.  Adams 
Exprc8.s  Co.,  229  U.  S.  381,  390,  57  L.  cd.  1237;  33  S.  Ct.  878. 

14 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

their  status.^    The  United  States  Supreme  Court  has 
held  that  they  are  not  corporations  within  the  rules 

3  A  bill  to  enjoin  violation  of  a  patent  by  a  New  York  joint  stock 
association  may  be  brought  against  shareholders  individually  as  part- 
ners. Tyler  v.  Galloway,  13  Fed.  477  (C.  C.  —  N.  Y.).  But  see 
Raymond  v.  Colton,  104  Fed.  219,  224  (C.  C.  A.  —  N.  Y.). 

The  following  cases  appHed  the  analogy  of  corporations.  Shares  in 
the  Adams  Express  Company  are  to  be  treated  as  shares  in  a  corpora- 
tion for  the  purpose  of  apportioning  dividends  between  life  tenant  and 
remainderman.  A  distribution  of  bonds  was  held  not  in  substance  a 
cash  dividend.  Bishop  v.  Bishop,  81  Conn.  509,  529,  71  Atl.  583. 
Ace.  D'Ooge  V.  Leeds,  176  Mass.  558,  563,  57  N.  E.  1025. 

The  common  law  rule  as  to  service  of  process  on  a  corporation  ap- 
plied to  service  on  a  New  York  joint  stock  company  and  service  of  a 
mandamus  by  order  of  court  on  the  local  express  agent  was  held  vahd. 
State  V.  Adams  Express  Co.,  66  Minn.  271,  68  N.  W.  1085.  Ace. 
Adams  Express  Co.  v.  Schofield,  111  Ky.  833,  64  S.  W.  903. 

In  an  action  of  tort  against  a  New  York  joint  stock  association  sued 
in  the  name  of  its  treasurer  under  the  New  York  statute  for  negligence 
by  an  express  driver,  held  that  the  organization  is  a  corporation  under 
the  law  of  New  York  suable  this  way  and  so  the  New  Jersey  statute 
providing  for  suit  against  associations  in  their  association  name  did 
not  apply.  Edgeworth  v.  Wood,  58  N.  J.  L.  463,  33  Atl.  940.  See 
Tide  Water  Co.  v.  State  Board  of  Assessors,  57  N.  J.  L.  516,  31  Atl.  220. 

On  the  issue  whether  a  certain  association  was  a  joint  stock  com- 
pany or  a  corporation,  its  classification  by  the  statutes  of  New  York 
where  it  was  created,  as  a  joint  stock  company,  is  not  conclusive. 
State  V.  U.  S.  Express  Co.,  1  Ohio  N.  P.  259. 

President  of  a  New  York  joint  stock  association  may  sue  on  behalf 
of  the  association  for  money  stolen  because  the  partners  are  too  numer- 
ous to  join.  Under  code  which  merges  equity  and  law  this  method 
can  be  used  even  in  actions  not  of  an  equitable  nature.  Piatt  v.  Col- 
vin,  50  Ohio  St.  703,  36  N.  E.  735. 

A  New  York  joint  stock  association  may  be  served  with  process  in 
Ohio  Hke  a  corporation.  People  v.  Wemple  cited  as  authority  for  its 
being  substantially  a  corporation.  Piatt  v.  Colvin  distinguished  on  the 
ground  that  the  issue  was  not  directly  presented.  Express  Co.  w.  State, 
55  Ohio  St.  69,  44  N.  E.  506. 

In  other  States  they  have  been  held  not  corporations.  A  New  York 
joint  stock  association  cannot  be  indicted  for  doing  business  in  the 
State  without  fihng  the  papers  required  by  statute  of  foreign  corpora- 
tions. Comm.  V.  Adams  Ex-press  Co.,  123  Ky.  720,  97  S.  W.  386.  But 
see  Adams  Express  Co.  v.  Schofield,  111  Ky.  833,  64  S.  W.  903. 

In  Massachusetts  they  have  been  held  partnerships.  Taft  v.  Ward, 
106  Mass.  518;  Bodwell  v.  Eastman,  106  Mass.  525;  Gott  v.  Dinsmore, 
111  Mass.  45. 

It  has  been  held  in  Massachusetts,  however,  that  certain  "joint 
stock  associations,"  so-called,  organized  under  the  laws  of  other  States 
as  something  distinct  from  corporations  may  have  so  many  of  the  ele- 
ments of  corporations  that  they  will  be  deemed  to  be  such  in  apply- 

15 


§  9]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

relating  to  jurisdiction  by  reason  of  diverse  citizenship 
of  the  parties.^  Under  another  New  York  statute, 
which  apphes  also  to  non-profit  associations,^  associa- 
tions of  seven  or  more  members  sue  and  are  sued  in  the 
name  of  its  president  or  treasurer.®   In  an  action  against 

ing  ^Massachusetts  statutes  regulating  transaction  of  business  by  foreign 
corporations.  "When  by  legislative  authority  or  sanction  an  associa- 
tion is  formed  capable  of  acting  independently  of  the  rules  and  princi- 
ples that  govern  a  simple  partnership,  it  is  so  far  clothed  with  corporate 
powers  that  it  may  be  treated  for  the  purposes  of  taxation  as  an  arti- 
ficial body,  and  become  subject  as  such  to  the  jurisdiction  of  the  govern- 
ment under  which  it  undertakes  to  act  in  its  associated  capacity." 
OHver  v.  Liverpool  &  London  Co.,  100  Mass.  531,  540.  As  to  the  real 
effect  of  this  case,  see  Liverpool  Ins.  Co.  v.  Mass.,  10  Wall.  566;  Ed- 
wards V.  Warren,  etc.,  Works,  168  Mass.  564,  567,  47  N.  E.  502. 

Adams  Express  Company  not  being  a  corporation  cannot  sue  for 
damages  to  its  property  in  the  name  of  the  association  or  in  the  name 
of  its  officers  as  trustees.  Weir  v.  Met.  St.  Ry.,  126  Mo.  App.  471,  103 
S.  W.  583. 

An  action  against  the  Adams  Express  Company  describing  it  not  as 
a  legal  entitj^  but  as  a  joint  stock  association  organized  and  existing 
under  the  laws  of  New  York  must  be  dismissed,  for  it  names  no  party 
defendant.    Met.  St.  Ry.  v.  Adams  Express  Co.,  130  S.  W.  101. 

*  In  an  action  by  the  president  of  the  United  States  Express  Company 
in  the  Illinois  L'nited  States  Court.  Held :  "On  looking  into  the  record 
we  find  no  satisfactory  showing  as  to  the  citizenship  of  the  plaintiff.  The 
allegation  of  the  amended  petition  is  that  the  United  States  Express 
Company  is  a  joint  stock  company  organized  under  a  law  of  the  State 
of  New  York  and  is  a  citizen  of  that  State.  But  the  express  company 
cannot  be  a  citizen  of  New  York  within  the  meaning  of  the  statutes 
regulating  jurisdiction  unless  it  is  a  corporation.  In  fact  the  allega- 
tion is  that  it  is  not  a  corporation,  but  a  joint  stock  company  —  that 
is  a  mere  partnership.  And  although  it  may  be  authorized  by  the  laws 
of  the  State  of  New  York  to  bring  suit  in  the  name  of  its  president, 
that  fact  cannot  give  the  company  power  by  that  name  to  sue  in  a 
federal  court."  The  record  does  not  show  that  the  members  of  the 
company  are  citizens  of  .some  State  other  than  Illinois.  Chapman  i;. 
Barney,  129  U.  S.  677,  082,  32  L.  ed.  800,  9  S.  Ct.  426. 

»  See  §  70,  note  21. 

»  Robl)ins  v.  Wells,  26  How.  Pr.  15. 

Failure  to  name  as  defendants  the  officers  or  members  of  a  joint 
stock  a.s.sociation  is  waived  by  a  general  appearance  of  the  association. 
BrookH  V.  Farmers'  As.s'n,  21  Weekly  Dig.  58. 

It  may  be  sued  for  libel.  Van  Aernam  v.  Bleistein,  102  N.  Y.  355, 
7  X.  K.  537. 

It  i.s  a  Huffiriont  an.swer  to  an  action  against  an  officer  of  a  joint  stock 
a.s.sociiiti<)n  und(!r  the  statute  to  aver  lliat  it  has  gone  out  of  existence. 
Pcckner  v.  Webb,  71  N.  Y.  S.  708,  35  Mi.sc.  291. 

16 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

a  joint  stock  association  the  funds  of  the  association 
must  be  exhausted  before  suing  the  individual  members.^ 
After  the  creditor  has  obtained  judgment  against  the 
corporation  and  it  is  unsatisfied  he  may  sue  the  indi- 
vidual members  as  partners.  He  sues  them  not  on  the 
judgment  but  on  the  original  cause  of  action.^  Under 
this  statute  the  association  through  its  officer  may  sue 
and  be  sued  by  another  member  in  an  action  at  law.^ 
A  shareholder  may  bring  suit  for  a  dissolution  of  the 
association/"  and  is  entitled  to  a  sale  of  the  assets  as 
is  a  member  of  an  ordinary  partnership.^^    Other  de- 

^  Robbins  v.  Wells,  26  How.  Pr.  15. 

8  Witherhead  v.  Allen,  4  Abb.  Dec.  628,  632  (N.  Y.). 

Though  a  creditor  must  get  judgment  against  the  association  before 
suing  individual  members  (under  New  York  statute)  yet  the  judgment 
is  not  conclusive  as  against  the  individual  members.  Allen  v.  Clark, 
65  Barb.  563. 

^  A  president  of  an  unincorporated  joint  stock  company  suing  for 
it  under  the  statute  can  sue  at  law  a  shareholder  to  recover  an  assess- 
ment where  the  articles  of  association  provide  for  it.  Bray  v.  Farwell, 
3  Lans.  495,  508. 

A  member  of  a  joint  stock  association  may  sue  it  in  the  names  of  its 
officers  under  the  statute.  Sanders  v.  Edling,  13  Daly  (N.  Y.)  238; 
Fritz  V.  Muck,  62  How.  Pr.  69;  Westcott  v.  Fargo,  61  N.  Y.  542,  550. 

A  member  of  a  stock  exchange  cannot  sue  the  president  under  the 
statute  for  an  injunction  to  prevent  his  suspension.  The  statute  was 
intended  to  apply  to  suits  having  in  view  a  remedy  against  the  prop- 
erty of  the  association.  As  this  was  a  voluntary  association  and  there 
was  nothing  to  show  that  the  proceedings  were  fraudulent  or  corrupt 
or  the  result  of  a  conspiracy,  there  is  no  case  for  equity  jurisdiction. 
Rorke  v.  Russell,  2  Lans.  244,  247. 

A  joint  stock  company  may  be  sued  by  a  member  for  nuisance. 
Saltsman  v.  Shultz,  14  Hun  256. 

1"  A  shareholder  in  a  joint  stock  association,  being  personally  liable 
for  its  debts  Hke  a  partner,  is  entitled  to  "institute  an  action  for  its 
dissolution  whenever  a  suitable  occasion  arises  rendering  it  legiti- 
mately desu-able  to  wind  up  its  affaii's."  Snyder  v.  Lindsey,  36  N.  Y. 
S.  1037. 

'1  On  a  consolidation  of  joint  stock  companies  a  dissentient  share- 
holder is  not  bound  to  accept  valuation  of  his  shares  fixed  by  the  ma- 
jority but  hke  any  partner  is  entitled  to  a  sale.  McVicker  v.  Ross,  55 
Barb.  247. 

A  consoUdation  of  joint  stock  companies  in  which  stock  in  a  cor- 
poration was  given  for  assets  of  the  associations.  On  a  shareholder's 
bill  against  the  trustees.    Held:  Duty  of  trustees  after  dissolution  is  to 

17 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

cisions  relating  to  these  associations  apply  the  analogies 
of  the  law  of  corporations. ^- 

seU  the  assets  and  divide  the  proceeds  among  the  shareholders.  Minor- 
ity cannot  be  forced  to  take  stock  in  the  corporation.  If  the  trustees 
fail  to  convert  into  cash,  the  shareholders  may  sue  them  and  recover 
either  the  proceeds  or  the  value  of  their  shares.  Receiver  of  remaining 
assets  appointed.    Frothingham  v.  Barnej',  6  Hun  366,  372. 

'-  Plaintiff  and  defendant  held  all  but  five  shares  in  a  joint  stock 
company.  The  other  shares  were  held  by  directors.  Defendant  agreed 
to  buy  plaintiff's  stock  in  consideration  of  his  resignation  and  that  of 
his  relatives  from  office  and  dehvery  of  one-quarter  of  the  goods  on 
hand.  Resignations  dehvered  later.  Action  for  goods.  Held:  Con- 
tract void  under  statute  of  frauds  (p.  225,  one  judge  dissenting).  Con- 
tract not  void  as  against  public  policj^  because  practically  entire  stock 
ownership  participated  so  not  an  illegal  contract  to  resign  as  director 
or  misappropriate  goods  of  the  association  (p.  226,  one  judge  dissent- 
ing). "  In  fact  and  in  law  there  was  no  partnership  between  the  parties 
and  there  were  no  firm  assets,  and  the  view  which  they  took  of  their  re- 
lations could  not  change  their  legal  aspect.  AU  that  the  plaintiff  had 
to  sell  and  all  that  the  defendant  could  buy  were  the  plaintiff's  shares 
in  the  association"  (p.  224).  Rajonond  v.  Colton,  104  Fed.  219  (C.  C. 
A.  — N.  Y.). 

A  shareholder's  petition  to  dissolve  a  joint  stock  association  on  the 
ground  of  fraud  was  held  on  the  evidence  not  sustained.  The  associa- 
tion was  not  bound  to  declare  dividends  of  profits  (p.  217).  Though 
persistent  undervaluation  in  annual  inventories  might  tend  to  depre- 
ciate plaintiff's  stock  and  might  be  sufficient,  the  evidence  did  not 
establish  it  (p.  214).  Colton  v.  Raymond,  85  N.  Y.  S.  210,  aff'd  100 
N.  Y.  S.  nil,  114  App.  Div.  911. 

Action  to  restrain  officers  of  joint  stock  association  from  consoUdat- 
ing  with  another  express  company.  They  had  had  the  by-laws  amended 
so  as  to  allow  it  to  be  done  without  consent  of  majority  of  shares. 
Held:  The  power  to  amend  the  by-laws  did  not  authorize  such  an 
act  which  was  beyond  the  scope  of  the  enterprise.  All  must  consent. 
All  shareholders  need  not  be  joined.    Blatchford  v.  Ross,  54  Barb.  42. 

Bill  by  shareholders  in  the  United  States  Exjjress  Company  alleg- 
ing fraud  and  praying  that  directors  be  obliged  to  call  meeting  of  stock- 
holders to  cdect  directors.  Articles  named  the  original  dircictors  and 
provided  that  they  might  fill  vacancies  and  that  on  petition  of  two- 
thirds  of  stock  directors  should  call  a  meeting  for  removal  of  a  director. 
No  provision  requiring  calling  of  otiier  meetings.  In  fact  none  ever 
held  and  present  directors  were  all  elected  by  the  board.  Held:  In 
fact  no  fraud  proved.  Not  entitled  to  decree  for  caUingof  meeting,  for 
the  articles  of  agre(!nient  are  valid  and  binding  at  common  law  regard- 
less of  statute.  "Tlie  United  States  Kx])ress  Comjiany  was  tliereby  con- 
Btitut(!d  a  legal  entity  with  the  right  of  existence  to  such  time  as  it 
miglit  H(!(!  fit  to  extend  tii('  same."  It  is  legal  to  provide  for  stock  in 
Hucli  a.s.socia1ions  with  limited  voting  rigiils.  Dissent  l)y  one  judge 
who  held  that  tlu;  statute  regulating  sucli  associations  and  the  articles 
api)arcntly    drawn    under    it    really    conteini)lated    some    election   of 

18 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

In  Pennsylvania,  under  the  statute  authorizing  hm- 
ited  partnerships,  associations  have  been  organized  and 
have  assumed  considerable  commercial  importance. 
They  are  deemed  to  be  partnerships  and  not  corpora- 
tions,^^ though  the  liability  of  members  is  as  limited  as 
ordinarily  in  corporations  and  they  have  other  attri- 
butes of  corporations.^^     In  the  Federal  Courts  they 

directors  and  that  the  plaintiff  should  have  his  decree.  Spraker  v. 
Piatt,  143  N.  Y.  S.  440,  158  App.  Div.  377. 

Under  statute  of  1849  there  need  be  no  subscription  in  writing  by 
the  members.     National  Bank  v.  Van  Derwerker,  74  N.  Y.  234. 

President  of  a  joint  stock  association  had  power  to  mortgage  its 
property  to  pay  its  debts  (where  a  similar  mortgage  had  been  expressly 
authorized  by  stockholders  and  directors).  Nelson  v.  Drake,  14  Hun 
465,  470. 

1^  "A  partnership  association,  commonly  but  inaccurately  called 
a  joint  stock  company,  is  the  creation  of  the  statutes  and  while  it  is 
assimilated  in  some  respects  to  a  corporation  it  is  nevertheless  essen- 
tially a  partnership."  By  statute  a  pm-chaser  of  shares  may  demand  an 
election  to  membership  and  if  not  granted  within  a  reasonable  time 
may  demand  an  appraisement  and  payment  for  his  shares.  When 
shares  are  purchased  at  different  times  the  election  or  appraisement 
must  be  as  to  all  he  holds  at  the  time  of  demand.  More  than  two 
months  not  unreasonable  where  six  hundred  members  scattered  over 
four  States  and  no  meeting  for  eight  months.  Method  of  appraisement 
considered.  Carter  v.  Producers  Oil  Co.,  200  Pa.  St.  579,  585,  50  Atl. 
167. 

Companies  organized  under  the  Pennsylvania  Act  of  1874  simply 
limited  partnerships.  Githens  v.  Grocery  Co.,  2  Del.  Co.  Ct.  452; 
Lennig  v.  Penn.  Morocco  Co.,  16  Weekly  N.  C.  114. 

Quasi-corporations  de  facto.  Eliot  v.  Him-od,  108  Pa.  St.  569;  Briar 
Hill  Co.  V.  Atlas  Works,  146  Pa.  St.  290,  23  Atl.  326. 

Limited  partnership  associations  "are  in  effect  corporations  or 
guasi-corporations.  They  are  creatures  of  the  law  and  by  its  express 
provisions  they  may  be  dissolved  and  thus  cease  to  exist."  Dissolu- 
tion five  years  before  by  decree  of  court  is  sufficient  plea  in  abatement 
to  writ  served  on  its  secretary.  Billington  v.  Gauthier  Co.,  9  Atl.  35 
(Pa.). 

'*  Members  of  a  Umited  partnership  association  are  not  personally 
hable  for  torts  of  its  agents  unless  they  personally  authorized  or  rati- 
fied them.  Such  association  has  some  of  the  attributes  of  a  corpora- 
tion. "UnUke  an  ordinary  partnership  and  like  a  corporation  it  is  an 
artificial  person  and  survives  the  death  of  a  member  or  a  sale  of  his  in- 
terest."   Whitney  v.  Backus,  149  Pa.  St.  29,  34,  24  Atl.  51. 

Shareholders  in  a  hmited  partnership  association  after  judgment 
against  the  association  unsatisfied  must  be  personally  summoned  in 
the  proceeding  to  estabhsh  their  individual  habihty  for  unpaid  sub- 

19 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

are  also  held  partnerships.^^  Courts  have  usually  re- 
quired strict  compliance  with  the  statutes  authorizing 
limited  partnerships  if  the  members  are  to  obtain  its 
benefits  and  be  relieved  of  the  unlimited  liability  for 
firm  debts  that  attaches  to  an  ordinary  partner.  The 
Pennsylvania  courts  have  been  equally  strict  with 
these   associations.^^    One   striking    provision    of   the 

scriptions  and  their  accounts  with  the  association  settled.  Lauder  v. 
Tillia,  117  Pa.  St.  304,  11  Atl.  86. 

^*  A  Pennsylvania  limited  partnership  association  is  not  a  corpora- 
tion and  not  entitled  to  sue  as  a  citizen  of  Pennsylvania  in  the  United 
States  Court.    Imperial  Brewing  Co.  v.  Wyman,  38  Fed.  574,  579. 

1^  False  statements  in  certificates  make  shareholders  Uable  as  gen- 
eral partners.    Van  Horn  v.  Corcoran,  127  Pa.  St.  255,  18  Atl.  16. 

Insufficient  statements,  i.e.,  not  specific  enough,  have  the  same 
effect.  Gearing  v.  Carroll,  151  Pa.  St.  79,  24  Atl.  1045;  Haslet  v.  Kent, 
160  Pa.  St.  85,  28  Atl.  501. 

A  statement  in  the  certificate  of  hmited  partnership  filed  under  the 
Pennsylvania  Act  of  1874  stated  that  certain  shares  were  paid  for  by 
a  right  of  way.  In  fact  the  right  of  way  had  not  yet  been  acquired. 
Held :  Shareholders  hable  as  general  partners.  Appeal  of  Hite  Natural 
Gas  Co.,  118  Pa.  St.  436,  12  Atl.  267. 

But  a  statement  that  the  capital  was  paid  tlu-ee-fourths  in  cash  was 
comphed  with  though  the  payments  were  not  by  aU  shareholders  pro- 
portionately.   Lauder  v.  Logan,  123  Pa.  St.  34,  16  Atl.  44. 

Lumping  together  separate  tracts  of  land  did  not  invahdate  cer- 
tificates. Laflin  Co.  v.  Steytler,  146  Pa.  St.  434,  23  Atl.  215;  Cock  v. 
Bailey,  146  Pa.  St.  328,  23  Atl.  370. 

A  limited  partnership  association  certificate  stating  the  capital  and 
that  it  was  to  be  paid  forthwith  was  filed,  but  the  capital  was  never 
paid  in.  The  statute  fixed  no  time  for  payment  but  contemplated  pay- 
ment by  instalments.  Held:  Statute  not  complied  with  where  they 
start  business  with  none  paid  in  and  the  members  are  hable  as  general 
partners.    Hill  v.  Stettler,  127  Pa.  St.  145,  13  Atl.  306. 

Strict  compliance  with  the  statute  is  necessary.  Good  faith  of  de- 
fendants or  actual  knowledge  of  i)laintiffs  is  immaterial.  A  failure  to 
include  a  detailed  description  of  the  property  contributed  as  capital 
made  them  liable  as  general  partners.  Sheble  v.  Strong,  128  Pa.  St. 
315,  18  Atl.  .397. 

Cai)ital  may  be  paid  in  patent  rights.  In  the  absence  of  fraud,  an 
cxccH.sivf!  valuation  docs  not  invalidate  (he  organization.  Rehfuss  v. 
Moor(!,  134  Pa.  St.  4()2,  19  Atl.  756. 

Witliclrawal  of  caf)ital  from  tin;  bank  whore  deposited  before  the 
organization  is  coniplctcul,  but  not  from  tlie  funds  of  the  association, 
does  not  iiiakc^  tlit;  organization  invalid.  Masters  v.  Lander,  131  Pa. 
St.  195,  IS  Atl.  872. 

Failure  to  pay  off  tlu;  mortgage  as  his  contribution  to  the  capital 

20 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS      [§  9 

Pennsylvania  statute  is  that  which  exempts  the 
association  from  liability  on  any  contract  involving 
over  five  hundred  dollars  unless  it  is  signed  by  two 
of    the    managers. ^^     The    association    is    named    as 

made  the  subscriber  liable  to  creditors  for  the  balance  of  his  subscrip- 
tion.   Cox  V.  Watts  Co.,  157  Pa.  St.  93,  27  Atl.  687. 

If  the  plaintiff  advised  and  assisted  in  the  organization  of  a  limited 
partnership  association  and  took  its  bonds  for  indebtedness  to  him, 
he  cannot  later  contend  that  the  organization  was  defective  and  that 
the  members  are  liable  as  general  partners.  Alleghany  Banks  v.  Bailey, 
147  Pa.  St.  Ill,  116,  23  Atl.  439. 

One  of  the  thi-ee  shareholders  of  a  hmited  partnership  association 
may  transfer  all  his  shares  immediately  after  organization  without 
impairing  its  validity.  Re  Globe  Refining  Co.,  151  Pa.  St.  558,  25 
Atl.  128. 

The  method  of  dissolution  provided  by  statute  must  be  followed  if 
the  partners  are  to  escape  unlimited  habihty.  Hence  while  equity  will 
wind  it  up  as  to  six  months'  business  continued  after  the  termination 
of  the  original  five-year  hmit  just  as  it  would  on  petition  of  a  minority 
proving  fraud  or  waste  or  insolvency,  as  to  the  busmess  conducted 
under  the  old  partnership  during  the  five-year  term  a  separate  hquida- 
tion  by  the  trustee  must  be  had.  Tindel  v.  Park,  154  Pa.  St.  36,  42, 
26  Atl.  300. 

Members  of  a  Hmited  stock  company  are  not  hable  as  general  part- 
ners for  goods  ordered  on  approval  in  the  name  of  the  company  before 
the  recording  of  the  articles  of  association  where  recorded  before  the 
approval.    Hinds  v.  Battin,  163  Pa.  St.  487,  30  Atl.  164. 

The  schedule  of  personal  property  subscribed  in  Ueu  of  cash  by  mem- 
bers of  a  partnership  association  is  sufficient  if  it  is  elaborate  and  truth- 
ful and  the  result  of  an  honest  effort  to  comply  with  the  statute  and  is 
such  as  to  enable  parties  dealing  with  the  association  to  readily  ascer- 
tain the  kind,  amount  and  value  of  property  contributed.  Robbins  Co. 
V.  Weber,  172  Pa.  St.  635,  34  Atl.  116. 

Members  of  one  hmited  partnership  association  formed  another 
and  certified  as  its  assets  property  which  was  the  property  of  the  old 
association.  Held:  Title  to  the  property  not  absolute  unless  it  was  a 
surplus  after  payment  of  debts  or  creditors  consented.  Hence  cer- 
tificate not  correct  and  members  hable  as  general  partners.  Lee  v. 
Burnley,  195  Pa.  St.  58,  45  Atl.  668. 

Members  of  a  Limited  partnership  association  are  hable  as  general 
partners  when  the  statement  filed  is  materially  false  and  no  subscrip- 
tion book  has  been  kept.  In  such  a  case,  the  funds  assigned  for 
creditors  are  not  hable  for  judgments  in  favor  of  the  partners.  Appeal 
of  Gebhart,  4  Pa.  Super.  Ct.  106. 

The  use  of  the  abbreviation  "Ltd."  instead  of  "Limited"  in  the 
name  as  required  by  statute  is  not  _  such  a  violation  of  the  statute  as 
to  impose  the  penalty.  Abington  Co.  v.  Reynolds,  24  Pa.  Super.  Ct. 
632. 

"  Under  Pennsylvania  statute  of  limited  partnership  associations 

21 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

the  party  to  an  action. ^^  The  provisions  relating 
to  shares  resemble   the  law  of  corporations.^^     The 

an  obligation  over  S500  not  signed  by  two  managers  is  enforceable  only 
against  the  person  incurring  the  debt.  Held :  A  draft  on  such  an  asso- 
ciation accepted  by  only  one  manager  and  discounted  by  plaintiff 
bank  was  not  enforceable  against  him.  Bank  bound  to  know  it  required 
two.  If  defendant  signed  expecting  another  to  sign  he  is  not  bound. 
Mercantile  Bank  v.  Lauth,  143  Pa.  St.  53,  21  Atl.  1017. 

A  hmited  partnership  association  is  not  liable  on  a  contract  for 
more  than  $500  unless  signed  by  at  least  two  managers.  Creditor  who 
has  one  signed  by  one  only  cannot  on  gi'ound  of  mistake  bring  a  bill  to 
reform  and  compel  execution  by  two.  Andrews  Bros.  Co.  v.  Youngs- 
town  Coke  Co.,  39  Fed.  353  (C.  C.  —  Pa.). 

A  member  of  a  hmited  partnership  association  has  not  the  power 
of  an  ordinary  partner  to  bind  the  association  by  a  contract  to  sell  and 
third  parties  are  bound  to  know  that  such  authority  is  vested  in  the 
managers.  ALso  of  the  $500  hmit.  Pittsburg  Co.  v.  Reese,  118  Pa.  St. 
355,  12  Atl.  362.  Ace.  on  latter  point,  Walker  v.  Keystone  Co.,  131 
Pa.  St.  546,  20  Atl.  309. 

A  hmited  partnership  association  may  adopt  and  sue  on  a  contract 
not  executed  according  to  the  statutory  formulation  when  it  has  made 
or  tendered  full  performance.  Park  Co.  v.  Kelly  Co.,  49  Fed.  618 
(C.  C.  A.  — Pa.). 

Where  a  hmited  partnership  association  has  received  the  considera- 
tion it  is  estopped  to  set  up  the  defense  to  an  action  for  the  price  that 
the  contract  was  not  signed  by  two  managers.  Here  the  company 
used  the  machine  and  claims  title  to  it.  Yaryan  Co.  v.  Perm.  Glue  Co., 
180  Pa.  St.  480,  36  Atl.  1080. 

Wives  of  other  shareholders  as  shareholders  may  make  the  requisite 
seven  to  organize.  "Ltd."  is  sufficient  for  "Limited."  The  $500  hmit 
if  violated  does  not  make  therh  liable  as  general  partners.  Bernard  Co. 
V.  Packard,  04  Fed.  309  (C.  C.  A.  —  Pa.). 

An  association  was  liable  for  ore  purchased  by  authorized  officer 
but  without  a  contract  executed  as  required  by  statute  for  liabilities 
over  -SoOO.  The  deliveries  were  each  less  than  that  and  the  company 
had  the  use  of  it.  Held:  The  company  is  liable.  McLaughlin  v.  Cen- 
ter Co.,  10  Pa.  Co.  Ct.  533. 

So  of  assessments  on  a  mutual  fire  insurance  pohcy  which  it  had 
h((ld  and  enjoyed  twenty  months.  Interstate  Co.  v.  Brownback,  1  Pa. 
Super.  Ct.  183. 

'"  An  action  against  a  limited  partnership  association  under  Act  of 
1874  should  bt;  brought  in  tlie  firm  name  instead  of  that  of  the  partners. 
Ladner  v.  aibl)on,  6  We(ikly  N.  C.  127. 

Tort  for  negligence  of  sto(;kholders  of  a  limited  joint  stock  company, 
but  tlie  company  was  served,  appeared  and  defended.  A  verdict 
again.st  the;  comj)any  was  sustained.  Wilkinson  v.  Evans,  34  Pa.  Super. 
Ct.  472. 

'"  An  attaching  creditor  gets  the  same  riglits  in  stock  of  a  limited 
partrirTship  as.sociation  that  his  debtor  had  and  though  the  assignee 
of  the  flebtor  did  not  till  afterwards  comply  with  all  the  requirements 

22 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

remaining  decisions  might  be  accounted  for  on  either 
theory.^" 

In  Michigan  the  '^partnership  association  hmited" 
closely  resembles  the  Pennsylvania  "limited  partner- 
ship association."  There  seems  to  be  a  tendency  to 
treat  them  as  corporations,^^  though  it  is  admitted  that 

for  a  formal  transfer,  the  assignment  from  the  debtor  was  complete 
before  that  and  just  as  in  the  case  of  a  corporation,  the  association 
could  not  refuse  to  record  the  transfer  on  comphance  with  the  formali- 
ties.   Tide  Water  Pipe  Co.  v.  Kitchenman,  108  Pa.  St.  630,  636. 

A  member  of  a  hmited  partnership  association  may  sue  it  for  a  debt 
due  him.  MacGeorge  v.  Chemical  Mfg.  Co.,  141  Pa.  St.  575,  21  Atl. 
671. 

A  declaration  of  forfeiture  by  trustees  which  does  not  foUow  notifi- 
cation of  default  exactly  as  required  in  the  by-laws  is  void  and  title  to 
the  shares  remains  in  the  shareholders.  Morris  v.  Mettaline  Co.,  164 
Pa.  St.  326,  30  Atl.  240;  166  Pa.  St.  351,  31  Atl.  114. 

On  death  of  member  of  a  limited  partnership  association  a  petition 
for  appraisal  of  assets  was  filed  by  his  executor  to  fix  the  price  to  be 
paid  by  the  company  for  the  shares.  Held  entitled  to  pro  rata  share  of 
profits  made  after  death  of  member.  Re  Henry  Disston,  etc.  Co., 
8  Weekly  N.  C.  58. 

-"  The  surplus  of  a  hmited  partnership  association  making  steel 
springs  may  be  invested  in  stock  of  a  steel  company  to  insure  a  supply 
of  steel.  Not  ultra  vires.  Layng  v.  A.  French  Co.,  149  Pa.  St.  308,  316, 
24  Atl.  215. 

A  hmited  partnership  to  refine  oil  may  purchase  stock  in  an  oil  re- 
fining company.  Where  members  have  allowed  managers  to  pursue  a 
pohcy  for  two  years,  they  are  barred  by  laches  from  objecting.  Patter- 
son V.  Tidewater  Co.,  12  Weekly  N.  C.  452. 

A  partnership  association  limited  is  not  liable  on  checks  issued  by 
its  treasurer  without  authority  modifying  a  contract.  Straw  v.  Murray, 
192  Pa.  St.  642,  38  Atl.  576. 

Chairman  of  a  hmited  partnership  association  who  was  entrusted 
with  the  management  of  its  affairs  had  power  to  mortgage  its  property 
to  secm'e  a  creditor  of  the  company.    Appeal  of  Fisher,  14  Atl.  225  (Pa.). 

Managers  of  hmited  partnership  association  have  no  power  to  sell 
its  entu'e  property  without  the  consent  of  all  the  shareholders.  Carter 
V.  Producers  Co.,  164  Pa.  St.  463,  30  Atl.  391. 

An  assignment  for  the  benefit  of  creditors  made  by  the  chairman  and 
secretary  of  a  hmited  partnership  association  pursuant  to  authority 
of  stockholders  is  vahd  without  formal  vote  of  managers  though  the 
by-laws  provide  that  the  managers  shall  have  entire  control  of  the 
business  of  the  company.  Rodgers  Printing  Co.  v.  Santa  Claus  Co., 
11  Pa.  Co.  Ct.  R.  529. 

21  Limited  partnership  associations  are  governed  by  the  law  of  cor- 
porations rather  than  by  the  law  of  limited  partnerships.  This  was  a 
proceeding  to  collect  subscription  to  shares.     Defense   that  paid  by 

23 


§  9]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

not  all  legislation  affecting  corporations  is  applicable 
to  these  associations.^^  There  is  a  provision  similar  to 
that  in  Pennsylvania  making  the  association  liable  on 
contracts  involving  over  five  hundred  dollars  only  if 
signed  by  two  managers. ^^    The  members  are  liable  as 

notes.  Winding  up.  Rouse  v.  Detroit  C3^cle  Co.,  Ill  Mich.  251,  257, 
69  N.  W.  511. 

Those  who  deal  with  a  partnership  association  Hmited  are  estopped 
to  deny  its  existence  just  as  they  would  be  in  dealing  with  a  corporation. 
"Each  is  a  legal  entity  whose  sole  warrant  for  existence  is  found  in  and 
whose  powers  and  liabilities  are  fixed  by  statute."  Hence  he  cannot 
for  slight  irregularities  in  organization  hold  as  general  partners  share- 
holders not  responsible  for  and  ignorant  of  them.  Refuses  to  follow  Penn- 
sylvania cases.    Staver  Co.  v.  Blake,  111  Mich.  282,  288,  69  N.  W.  508. 

Oral  evidence  of  what  was  said  at  meeting  of  shareholders  of  a  part- 
nership association  Umited  is  not  admissible  when  the  record  is  not 
ambiguous.    Lipsett  v.  Hassard,  158  Mich.  509,  511,  127  N.  W.  1091. 

Evidence  showed  no  contract  for  salary  between  a  partnership 
association  limited  and  its  president.  Berry  Bros.  v.  Hooper's  Est., 
179  Mich.  67,  146  N.  W.  275.  But  in  a  more  recent  case  it  was  said 
that  a  member  of  such  an  association  is  not  in  a  worse  position  as  to 
interest  on  advances  to  the  firm  than  a  member  of  an  ordinary  part- 
nership.    Mack  V.  Engel,  165  Mich.  540,  550,  131  N.  W.  92. 

^  Certain  provisions  of  the  constitution  are  made  applicable  to  aU 
associations  and  joint  stock  companies  having  any  of  the  powers  or 
privileges  of  corporations.  But  it  does  not  follow  that  all  provisions 
in  later  legislation  as  to  corporations  apply  to  partnership  associations. 
The  provision  for  minority  representation  is  one  that  does  not  apply. 
Attorney  General  v.  McVickie,  138  Mich.  387,  389,  101  N.  W.  552. 

^  Geel  V.  Goulden,  168  Mich.  413,  421,  134  N.  W.  484;  McCain  v. 
Smith,  172  Mich.  1,  137  N.  W.  616,  619. 

PlaLntifT  had  a  claim  for  a  commission  on  G.  who  had  sold  certain 
patents  to  defendant,  a  Michigan  limited  partnership  association. 
Plaintiff  claimed  defendant  promised  to  paj^  it.  Held:  Under  Michigan 
statute  not  lial)le  l)ecause  $500  involved  and  not  formally  executed. 
No  estoppel  because  plaintiff  had  no  share  in  the  title  to  the  property 
that  was  being  transferred.  Dickinson  v.  Matheson  Co.,  161  Fed.  874 
(C.  C.  —  Pa.). 

Endorsement  of  a  note  for  over  $500  by  only  one  manager  does  not 
imposf!  liability  on  a  partnership  association  limited  for  any  amount. 
Citizen's  Bank  v.  Vaugiian,  115  Mich.  1.56,  73  N.  W.  143. 

Tran.sf(!r  by  endorsenusnt  of  notes  of  a  shareholder  in  payment  of  a 
claim  against  it  was  not  an  incurring  of  a  liability  within  the  above 
cluuHC.    Shaw,  Kendall  Ac  Co.  v.  Brown,  12S  Mich.  573,  87  N.  W.  757. 

A  contract  crcat  ing  a  habiiity  of  ov(t  $500  made  by  a  single  manager 
of  a  j)art  nersliij)  associat  ion  limited  is  a  nullity  and  binds  neither  i)arty. 
Iloyt,  V.  Paw  I'aw  GrajH-  .Juice  Co.,  158  Mich.  619,  123  N.  W.  .529. 

Spirit-  of  statute  complied  with  wiiere  there  was  a  record  of  a  meet- 

24 


Chap.  II]     STATUTORY  JOINT  STOCK  ASSOCIATIONS     [§  9 

general  partners  if  the  organization  is  not  strictly  ac- 
cording to  statute.-^  In  a  few  other  States  the  statutes 
authorizing  limited  partnerships  seem  to  have  been 
found  adaptable  to  the  needs  of  unincorporated  asso- 
ciations,-'' but  in  most  States  they  are  not  fit  for  that 
purpose.-*^ 

ing  of  all  the  managers  who  voted  to  approve  the  contract  which  was 
then  closed,  though  it  was  signed  only  by  the  president.  Howard  v. 
Factory  Land  Co.,  167  Mich.  251,  131  N.  W.  113. 

'^^  A  partnership  association  Umited  failed  to  record  its  articles  and 
stock  was  sold  plaintiff  by  one  member  on  false  representations.  Plain- 
tiff sues  aU  as  general  partners  for  cancellation  of  certificate  and  repay- 
ment of  purchase  price.  Held  for  plaintiff.  Nichols  v.  Buell,  157  Mich. 
609,  122  N.  W.  217. 

A  partnership  association  limited  filed  a  schedule  purporting  to 
show  the  property  for  which  the  stock  was  issued  and  the  subscribers. 
A  block  of  stock  was  issued  to  one  promoter  in  consideration  of  prop- 
erty and  turned  back  by  him  into  the  treasury.  The  property  was  de- 
scribed only  generally  as  the  property  of  a  former  corporation,  not 
specifically.  On  a  shareholder's  action  to  cancel  and  recover  her  sub- 
scription to  treasury  stock,  Held :  Statement  not  in  compliance  with 
the  statute  and  the  contributions  of  property  cannot  be  treated  as 
payments  of  capital  stock.  But  one  who  did  not  become  a  shareholder 
till  after  this  schedule  was  filed  and  then  bought  treasury  stock  is  not 
liable  to  pay  up  the  balance  of  his  shares  which  he  bought  at  a  dis- 
count.   Macomber  v.  Endion  Co.,  160  Mich.  54,  59,  125  N.  W.  26. 

A  shareholder  cannot  rescind  contract  of  purchase  of  his  shares  on 
ground  that  the  partnership  association  limited  was  not  legally  or- 
ganized when  the  only  objection  was  that  it  did  not  acquire  valid  title 
to  all  the  property  scheduled  in  its  articles  and  possibly  the  amount  of 
cash  capital  was  overstated.  Andrews  v.  Brace,  154  Mich.  126,  117 
N.  W.  586. 

2^  Under  statute  of  limited  partnership  associations  a  shareholder 
is  hable  to  extent  of  unpaid  subscriptions  after  judgment  against  the 
association  is  returned  unsatisfied.  But  the  estate  of  a  deceased 
shareholder  is  not  Uable  on  a  debt  incurred  after  his  death.  Bodey  v. 
Cooper,  82  Md.  625,  628,  34  Atl.  362. 

LiabiUty  of  members  of  Hmited  partnerships  in  Virginia  by  statute 
is  limited  to  unpaid  subscriptions.  The  legislature  indicated  certain 
contingencies  where  the  members  should  be  liable  as  general  partners. 
If  it  had  intended  to  impose  this  for  failure  to  comply  exactly  with  the 
statute,  the  legislature  would  have  said  so.  Deckert  v.  Chesapeake, 
etc.  Co.,  101  Va.  804,  810,  45  S.  E.  799. 

A  deed  of  land  of  a  partnership  association  formed  under  the  laws 
of  Virginia  executed  by  the  association  and  also  by  all  the  members  and 
stockholders  of  it  is  sufficient  to  pass  its  title.  Richmond  v.  Pinnix, 
208  Fed.  785,  791  (D.  C.  —  N.  C). 

^  In  Massachusetts,  for  example,  where  unincorporated  associa- 

25 


§  10]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

§  10.  Defective  Incorporations 

When  a  group  of  individuals  attempt  to  form  a  cor- 
poration and  so  far  fail  that  they  do  not  become  a 
corporation  de  facto j^  their  legal  relation  creates  a 
problem  upon  which  courts  have  differed.  Most  juris- 
dictions have  argued  that  there  is  no  intermediate  or- 
ganization between  partnership  and  corporation  and 
that  as  they  are  not  a  corporation  they  must  be  a 
partnership.-  Others  have  held  that  because  the  intent 
was  to  form  a  corporation  with  limited  liability  of 
members,  they  cannot  be  held  to  the  full  liability  of 
partners.^    Since  it  is  well  settled  in  the  law  of  partner- 

tions  have  been  elaborately  developed,  the  statute,  Rev.  Laws  Ch.  71, 
requires  filing  a  certificate  with  the  names  of  the  partners  which  would 
make  impracticable  any  attempt  at  transferable  shares. 

1  For  an  analysis  of  the  decisions  on  de  facto  corporations,  see  an 
article  by  Prof.  Edward  H.  Warren,  20  Harv.  L.  Rev.  456. 

2  Re  Mendenhall,  Fed.  Cas.  No.  9425  (savings  association);  Cole- 
man V.  Coleman,  78  Ind.  344,  346  (manufacturing  company);  Kaiser 
V.  Lawrence  Savings  Bank,  56  la.  104,  116,  8  N.  W.  772  (manufacturing 
company);  Central  Bank  v.  Sheldon,  86  Kan.  460,  121  Pac.  340  (no 
organization  in  good  faith  under  an  Arizona  incorporation) ;  Kierstead 
V.  Bennett,  93  Mc.  328,  332,  45  Atl.  42  (note  of  treasurer  of  a  Trotting 
Park  Association);  Whipple  v.  Parker,  29  Mich.  369,  380  (manufactur- 
ing company);  Fuller  v.  Rowe,  57  N.  Y.  23,  26  (manufacturing  com- 
panv).  But  see  apparentlv  contra,  Hudson  v.  Spalding,  6  N.  Y.  S. 
877'(baseball  club);  Farmer's'  Co.  v.  Jones,  147  S.  W.  668  (Tex.  Civ. 
App.)  (stockholders  running  a  business  pending  reorganization).  In 
one  case  they  were  described  as  an  "unincorporated  association." 
Ben  Co.  v.  Zimmerman,  110  Md.  313,  321,  73  Atl.  19. 

'  Agreement  to  act  as  member  of  provisional  committee  of  pro- 
jected railroad  did  not  make  defendant  liable  as  partner.  Rcynell  v. 
Lewis,  15  M.  &  W.  517,  .529;  Wilson  v.  Curzon,  16  L.  J.  Ex.  122. 

But  dirc^ctors  of  watcu-  supply  company  whi(!h  faik^d  to  get  charter 
w(!re  held  on  contract  to  buiUl  works.  Doubleday  v.  Muskott,  7  Bing. 
110,  116. 

Subscribers  to  and  stockholders  in  defectively  organized  corporation 
are  not  i)artiiers  a.s  to  the  business  carried  on.  Fay  v.  Noble,  7  Cush. 
IHH; Trowbridge?;.  S(;udder,  11  Cush. 83;  Ward?'.  Brigham,  127  Mass. 24. 

When;  tin;  Hubsciribcr  is  induc(!d  to  go  in  by  fraud  of  a  promoter, 
whr'llicr  j)artner.s  or  not,  was  not  decided.  Perry  v.  Hale,  143  Mass. 
540,  10  N.  ]':.  174. 

Transacting  business  before  certificate  issued,  tliougii  contrary  to 

26 


Chap.  II]  DEFECTIVE  INCORPORATIONS  [§10 

ship  that  intent  to  escape  personal  liability  does  not 
protect  those  who  do  acts  which  otherwise  would  con- 
stitute them  partners/  it  would  seem  that  an  associa- 
tion for  profit  which  fails  to  carry  out  its  intention  to 
become  incorporated  should  be  held  to  be  a  partner- 
ship unless  that  jurisdiction  is  prepared  to  recognize 
the  legal  existence  of  associations  as  intermediate  be- 
tween partnership  and  corporation. 

Promoters  of  corporations  may  or  may  not  be  part- 
ners as  to  the  business  of  organizing  the  corporation, 
but  they  are  not  partners  merely  because  they  con- 
template doing  business  in  the  future  through  a  cor- 
poration nor  because  they  are  numerous.^ 

A  slightly  different  situation  arises  when  an  un- 
doubted association  decides  to  incorporate.  Here  there 
is  a  partnership  to  start  with  and  all  hold  that  it  con- 
tinues until  incorporation  is  complete.  Where  a  special 
charter  has  been  granted  the  partnership  continues 
until  the  charter  is  accepted  by  some  unequivocal  act.® 

statute,  does  not  make  them  partners.  First  National  Bank  v.  Almy, 
117  Mass.  476. 

But  agent  of  a  projected  bank  who  tried  to  get  charter  and  failed 
was  allowed  to  hold  members  for  his  services  whether  or  not  they  at- 
tended the  meeting  that  authorized  them.  Sproat  v.  Porter,  9  Mass. 
300,  303. 

There  is  a  curious  old  case  that  is  apparently  the  converse  of  the 
above  docti'ine.  Association  formed  to  buy  and  run  a  steamer.  Stipu- 
lation that  no  signer  be  hable  beyond  amount  of  his  subscription. 
Later,  part  of  them  got  a  charter  providing  that  shareholders  be  liable 
for  debts.  Held:  Original  agi-eement  did  not  provide  for  incorpora- 
tion. This  changed  the  agreement.  Partners  may  object  to  Umited 
liability  of  co-partners.  Defendants  not  bound  unless  they  assented  to 
new  agreement,  because  it  changed  scope  of  the  partnership  and  plain- 
tiff subscribers  cannot  compel  defendants  to  pay  their  subscriptions. 
Southern  Steam  Packet  Co.  v.  Magrath,  McMuU.  Eq.  (S.  C)  93,  100. 

*  Davison  v.  Holden,  55  Conn.  103,  112  (cooperative  store).  See 
§17. 

5  Arnold  v.  Conklin,  96  111.  App.  373;  Barnett  v.  Lambert,  15  M.  & 
W.  489;  Reynell  v.  Lewis,  15  M.  &  W.  517. 

^  The  members  are  individually  hable  for  debts  incmred  before 

27 


§  11]  ASSOCLITIOXS   FOR   PROFIT  [Ch.u'.  II 

When  an  association  is  incorporated  a  formal  convey- 
ance is  necessary  to  pass  title  to  its  real  estate  to  the 
corporation.^ 

§  11.  Formal  Associations  for  Profit 

A  form  of  group  organization  has  developed  which  has 
taken  on  the  feature  of  transferable  shares  and  by  the 
stipulations  of  elaborate  trust  deeds  has  endeavored  as 
far  as  possible  to  adopt  the  desirable  characteristics  of 
corporations.  These  associations  in  sunple  forms  were 
used  in  some  States,  notably  ^Massachusetts  at  an  early 
date. 

"So  when  companies  have  been  formed  without  in- 
corporation, consisting  of  considerable  numbers,  for 
the  purchase  of  wild  lands,  with  a  view  to  a  resale  or 
other  like  purpose,  the  grant  is  made  to  trustees  in 
trust  for  several  members  designated  and  a  certificate 
of  such  right  to  an  aliquot  part  of  the  beneficial  in- 
terest is  usually  issued  by  the  trustees  to  the  several 
parties,  indicating  what  aliquot  part  each  holds  in  such 
trust  property  or  beneficial  interest;  and  such  certifi- 
cates are  well  understood  as  muniments  of  property."^ 

One  of  the  earliest  examples  of  this  form  of  combina- 
tion in  this  countrj^  was  that  used  by  the  original 
Sugar  Trust  -  and  the  original  Standard  Oil  Trust. ^ 

but  not  after  incorporation.  Durham  Co.  v.  Clutc,  112  X.  C.  440,  17 
S.  E.  419. 

Vote  to  accept  charter,  but  no  formal  organization  under  it  or 
tran.sfer  of  assets.  Held  partnership.  Willis  v.  Chapman,  68  Vt.  459, 
35  Atl.  4.59. 

'  A  joint  stock  company  was  incorporated.  Land  stood  in  name  of 
trustees  for  the  former.  No  deed  to  latter  executed.  Held:  No  title 
in  corporation.    Frank  v.  Drenkhahn,  70  Mo.  508. 

•  Attorney  General  v.  Fetleral  St.,  3  Gray  1,  46. 

»  People  V.  North  River  Sugar  Refinmg  Co.,  121  N.  Y.  582,  623,  24 
N.  E.  834. 

»  State  V.  Standard  Oil  Co.,  49  Ohio  St.  137,  178,  30  N.  E.  279. 

28 


Chap.  II]     FORMAL  ASSOCIATIONS  FOR  PROFIT  [§  11 

Most  of  the  members  composing  these  associations 
were  corporations.  The  combinations  were  held  to  be 
illegal  under  State  laws  prohibiting  monopolies  and 
the  corporations  composing  them  were  dissolved. 

It  has  been  earnestly  contended  that  the  trust  deeds 
by  which  these  organizations  are  created  violate  the 
rule  against  perpetuities  and  that  forbidding  restraints 
upon  alienation  unless  limited  to  twenty-one  years 
after  a  life  or  lives  in  being  at  the  creation  of  the  trust. 
In  a  leading  case  the  court  said: 

''Is  the  trust  void  as  creating  a  perpetuity,  or  im- 
posing an  illegal  restraint  upon  alienation?  The  right 
of  a  shareholder  to  convey  his  own  shares,  or  interests, 
under  the  trust  is  in  no  way  restricted,  but  it  is  con- 
tended that  illegality  is  found  in  the  circumstance  that 
no  sale  of  the  corpus  of  the  trust,  and  no  termination 
of  the  trust,  will  necessarily  occur  within  the  period  of 
a  life  or  lives  in  being  at  the  time  of  the  creation  of 
the  trust  and  twenty-one  years,  and  that  the  provision 
that  the  certificate  holders  shall  not  have  partition  of 
the  land,  and  can  compel  its  sale  only  by  a  three- 
fourths  vote,  works  an  illegal  restraint  upon  alienation. 

"The  trustees  take  the  legal  title  to  allow  the  asso- 
ciation through  its  directors  to  manage  the  land  and 
to  enjoy  its  rents  and  income,  and  to  sell  the  land  free 
of  trusts  at  the  will  of  the  association,  with  a  further 
provision  for  the  termination  of  the  trust  by  vote  of  the 
association  at  any  time  after  July  1,  1895.  Leases  for 
more  than  five  years,  and  sales,  can  be  made  only  in 
accordance  with  an  affirmative  vote  of  three-fourths 
of  the  shares,  and  a  like  vote  is  necessary  to  terminate 
the  trust.  The  substance  of  the  situation  is  that  the 
shareholders  for  the  time  being  have  the  whole  equi- 

29 


§  11]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

table  estate  in  the  corpus  of  the  trust,  and  can  at  all 
times  sell  and  transfer  their  equitable  estates  at  their 
own  pleasure;  and  the  trustees  hold  the  legal  title  in 
fee  simple  in  trust  to  do  with  the  land  whatever  may 
be  required  by  the  owners  of  the  equitable  estate,  which 
owners  have  full  capacity,  at  all  times  and  at  their 
own  option,  to  require  a  sale  of  the  land  discharged  of 
the  trust,  or  the  immediate  termination  of  the  trust 
after  a  period  of  five  years  and  a  few  days,  the  owners 
of  the  equitable  estate  being  a  voluntary  association, 
the  beneficial  interests  in  which  are  represented  by 
shares,  and  the  association  acting  by  vote  of  the  share- 
holders. That  the  directions  of  the  association  to  the 
trustees  are  to  be  given  by  three-fourths  votes,  rather 
than  by  majority  votes,  is  immaterial,  since  it  cannot  be 
said  that  one  is  more  improbable  than  the  other :  either 
is  a  reasonable  way  of  declaring  the  will  of  the  asso- 
ciation, and  there  is  no  provision  that  a  vote  to  sell  or 
to  end  the  trust  must  be  passed  within  any  stated 
period,  or  at  all. 

"Such  a  trust  for  the  convenience  of  an  unincor- 
porated association  in  renting  and  selling  the  land, 
under  which  the  land  is  held  for  no  other  purpose,  and 
where  the  income  is  not  accumulated  but  is  distrib- 
uted as  it  accrues,  and  where  the  land  is  to  be  sold  free 
of  trusts  at  the  will  of  the  association,  and  where  the 
whole  equitable  interest  in  the  trust  is  at  every  moment 
vested  absolutely  in  those  who  at  that  moment  are 
shareholders,  and  never  can  become  vested  in  any  other 
persons  save  by  act  of  the  absolute  owners  or  by  opera- 
tion of  law  upon  their  property,  and  not  by  force  of 
any  hmitation  contained  in  the  deed  of  trust,  the  equi- 
table interests  so  vested  being  also  constantly  vendible 

30 


Chap.  II]     FORMAL  ASSOCIATIONS  FOR  PROFIT  [§11 

by  their  several  owners  without  let  or  hindrance,  as 
well  as  subject  to  their  debts  and  passing  like  other 
property  upon  death  by  virtue  not  of  the  deed  of  trust 
but  of  the  general  laws  governing  the  disposition  of  the 
property  of  decedents,  withdraws  no  property  from 
commerce,  and  is  not  within  the  reason  of  what  is 
called  the  rule  against  perpetuities.  The  trust  in- 
volves no  future  limitations,  no  restraint  upon  aliena- 
tion, and  no  accumulation  either  of  income  or  of  prin- 
cipal. The  provisions  by  which  the  trust  fund  may  be 
at  some  time  held  for  the  benefit  of  persons  not  share- 
holders at  its  inception,  and  who  may  become  such  at  a 
period  more  remote  than  that  allowed  by  the  rule,  are 
not  future  limitations  made  by  the  trust  deed  in  the 
sense  in  which  the  word  '  limitation '  is  used  in  speaking 
of  the  operation  of  the  rule.  If  there  shall  ever  be  a 
shareholder  other  than  those  in  whom  the  whole 
equitable  estate  was  absolutely  vested  at  the  inception 
of  the  trust,  that  shareholder  will  not  take  his  interest 
by  virtue  of  a  limitation  in  the  trust  deed,  but  because 
of  his  succession  by  virtue  of  the  general  principles  of 
law  to  the  property  of  the  original  shareholder.  The 
new  shareholder,  with  reference  to  the  rule,  is  in  the 
same  situation  as  a  person  who,  after  the  expiration  of 
all  lives  which  were  in  being  when  a  fee  or  an  estate 
tail  was  created,  and  of  a  further  period  of  twenty-one 
years,  takes  the  fee  by  the  operation  of  the  law  which 
makes  property  vendible  by  or  descendible  from  the 
owner,  and  not  by  virtue  of  a  limitation  in  the  instru- 
ment which  created  the  fee.  The  entire  ownership  is 
never  for  a  moment  uncertain,  nor  unvested,  and  at 
every  moment  each  owner  can  freely  dispose  of  his 
property,  and  at  each  moment  it  can  be  transferred  to 

31 


§  11]  ASSOCLITIOXS   FOR   PROFIT  [Chap.  II 

his  creditor  by  the  ordinary  process  of  the  law,  and  at 
each  moment  the  trust  can  be  terminated  at  the  v^ill  of 
the  owTiers  of  the  equitable  interest."  ^ 

Although  this  decision  was  by  only  a  majority  of  the 
court,  it  has  been  frequently  cited  since  in  Massachu- 
setts without  criticism  and  may  be  assumed  to  be  the 
law  in  that  State.  In  the  onl}'  other  decision  on  the 
point  in  which  a  business  enterprise  was  concerned, 
the  lUiriois  court  said:  ''"\Miere  there  are  persons  in 
beuig  at  the  creation  of  an  estate  capable  of  convej'ing 
an  immediate  and  absolute  estate  in  fee  in  possession 
there  is  no  suspension  of  the  power  of  alienation  and 
no  question  of  perpetuities  can  arise."  '" 

The  contention  that  these  trusts,  unless  limited  in 
duration  to  the  period  permitted  by  the  Rule  against 
Perpetuities,  are  illegal  as  restraints  upon  alienation 
because  of  the  provision  usually  inserted  that  the 
shareholders  shall  have  no  right  to  demand  partition 
or  other  di\i.sion  of  their  respective  shares  before  the 
termination  of  the  trust  in  the  manner  pro\'ided  therein 
which  without  an  express  limitation  of  duration  to  a 
life  or  lives  in  being  and  twentj^-one  years  thereafter 
might  exceed  that  period.  There  are  several  English 
cases  relating  to  non-profit  associations  where  the  trust 
was  held  invalid  because  of  restrictions  on  the  right  to 
wind  up  the  association. 

A  gift  by  will  for  the  benefit  of  the  Penzance  Library 
was  held  void  because  the  library  was  established  for 
the  use  of  subscribers  only  and  one  of  the  rules  pro- 

*  Howe  t'.  Morse,  174  Miiss.  491,  55  N.  E.  213.  (The  report  of  this 
case  contains  the  full  text  of  a  real  estate  trust  deed,  though  not  of  the 
most  imjiroved  tj-pe). 

*  Hart  V.  Seymour,  147  111.  598,  35  N.  E.  246  (real  estate  develop- 
ment association).  Ace.  Gray,  Perpetuities,  3d  ed.,  §  509  L.  See 
§  37,  note  1. 

32 


Chap.  II]     FORMAL  ASSOCIATIONS  FOR  PROFIT  [§11 

vided  that  it  should  not  be  broken  up  as  long  as  ten 
subscribers  remained. **  A  bequest  to  the  Tunstall 
Athenseum  and  Mechanics  Institution  was  held  void 
for  perpetuity  the  institution  being  a  voluntary  asso- 
ciation and  one  of  the  rules  providing  that  it  should  not 
be  dissolved  without  the  consent  of  nine-tenths  of  the 
members  present  at  a  meeting.^ 

Of  these  cases  the  court  in  Howe  v. Morse  says :  ''They 
were  gifts  to  societies  whose  members  took  no  personal 
beneficial  interest  in  the  property,  which  must  be  kept 
for  the  purposes  of  the  society,  and  could  not  be  dis- 
posed of  by  the  members  for  the  time  being.  These 
cases,  there  being  no  public  charity,  were  simply 
private  trusts  and  the  gifts  were  bad  because  the  mem- 
bers for  the  time  being  did  not  have  power  to  alienate 
the  estate."  This  court  further  said:  ''We  express  no 
opinion  upon  the  contention  that  the  interests  of  the 
shareholders  are  real  estate  and  that  an  agreement  not 
to  make  partition  may  be  open  to  objection  under  the 
law  as  to  perpetuities  and  restraints  upon  alienation. 
These  are  matters  which  upon  any  theory  cannot  make 
the  whole  trust  illegal."  That  is,  the  court  did  not 
decide  whether  or  not  the  provision  depriving  the 
shareholder  of  the  right  to  partition  might  be  declared 
void.  As  the  case  before  them  was  a  bill  to  enforce  the 
right  to  dissolution  regardless  of  this  stipulation,  it  is 
hard  to  see  why  the  court  did  not  also  decide  that 
question  in  entering  its  decree. 

Until  the  question  is  decided  in  other  jurisdictions, 
however,  it  is  safer  to  limit  the  duration  of  the  trust  to 
the  period  permitted  by  the  Rule  against  Perpetuities, 

6  Carne  v.  Long,  2  D.  <F.  &  J.  75,  79. 

7  In  re  Button,  4  Ex.  D.  54,  58.  Ace.  Carrier  v.  Price  (1891),  3  Ch. 
159,  169. 

33 


§  11]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

and  this  seems  to  be  the  usual  practice.  In  our  kaleido- 
scopic business  life  the  enterprise  will  probably  be 
reorganized  well  "^dthin  the  time  limited.  The  limi- 
tation usually  adopted  is  twenty  years  after  the  death 
of  the  survivor  of  certain  persons  named,  who  are  usu- 
ally the  children  of  trustees  or  prominent  shareholders. 
Since  there  might  be  inconvenience  in  tracing  the  lives 
of  these  individuals  not  officially  connected  with  the 
trust  if  a  question  as  to  the  proper  tune  for  termination 
of  the  trust  should  ever  arise,  a  more  satisfactory  form 
would  seem  to  be  that  employed  on  page  407  of  the 
Appendix  of  Forms  limiting  the  trust  to  twenty  years 
from  the  death  of  the  last  sur\dvor  of  the  trustees  named 
''and  such  other  persons  now  living  as  shall  hereafter 
become  trustees  of  these  presents  before  any  person 
or  persons  not  now  living  shall  have  become  the  only 
trustee  or  trustees  thereof  or  the  offices  of  trustees 
thereof  shall  have  become  entirely  vacant  whichever 
of  the  said  periods  shall  first  expire  and  at  the  expira- 
tion of  the  time  so  limited  the  said  trusts  shall  ter- 
minate." It  i^  important  in  using  this  form  to  recall 
that  it  must  be  so  phrased  that  no  interval  could  exist 
when  all  the  present  trustees  are  dead  and  none  of  their 
successors  then  in  office  were  living  at  the  date  of 
the  creation  of  the  trust  though  subsequent  trustees 
might  be  men  who  were  living  when  the  trust  was 
created.  Such  a  limitation  has  been  held  void  for 
uncertainty.^ 

An  examination  of  recent  forms  of  such  trust,  copies 
of  which  are  appended,  will  show  how  closel}^  such  an 
organization  can  be  made  to  resemble  an  incorporated 
company.     It  is  created  by  a  declaration  of  trust  by 

*  Ex  parte  Exmouth,  23  Ch.  D.  1.58,  163. 
34 


Chap.  II]      FORMAL  ASSOCIATIONS  FOR  PROFIT  [§11 

two  or  more  individual  trustees  reciting  that  they  are 
to  acquire  certain  property,  usually  either  real  estate 
or  corporate  securities,  and  will  hold  it  upon  certain 
trusts.  The  management  of  the  trust  estate  is  vested 
usually  in  the  trustees,  but  sometimes  in  a  separate 
board  of  directors.  It  is  usually  provided  that  the  trus- 
tees shall  be  self-perpetuating,  but  if  they  are  also  the 
managers,  the  shareholders  frequently  have  power  to 
elect  or  remove  them.  Subscribers  to  the  trust  fund 
receive  transferable  certificates  for  stock  resembling  as 
closely  as  possible  corporate  stock.  There  is  provi- 
sion for  meetings  and  certain  powers  of  the  shareholders 
may  be  exercised  by  vote.  It  is  the  unlimited  liability 
of  partners  for  the  debts  of  the  concern  that  has  made 
the  ordinary  partnership  an  unsatisfactory  method  of 
organization  for  modern  business  and  an  impossibility 
in  dealing  with  large  aggregations  of  capital  of  many 
investors.  Recognizing  the  danger  that  the  courts 
might  hold  them  partnerships  even  in  the  face  of  their 
express  declaration  to  the  contrary,  these  trust  in- 
struments have  developed  ingenious  methods  for 
eliminating  this  personal  liability  of  shareholders.^ 
The  following  quotation  is  from  the  deed  of  a  well- 
known  real  estate  trust  owning  a  large  office  building 
in  Boston: 

''The  shareholders  hereunder  shall  not  be  liable  for 
any  assessment  and  the  trustees  shall  have  no  power  to 
bind  the  shareholders  personally.  In  every  written 
order,  contract  or  obligation,  which  the  trustees  shall 
authorize  or  enter  into,  it  shall  be  their  duty  to  stipulate 
or  cause  to  be  stipulated  that  neither  the  trustees  nor 

3  These  forms  were  originated  in  England.  For  an  elaborate  stipu- 
lation see  Re  Professional  Life  Assui'ance  Co.,  L.  R.  3  Eq.  670,  L.  R. 
3  Ch.  167,  36  L.  J.  Ch.  442  (clauses  263-266).    See  §§  29-31. 

35 


§  12]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

shareholders  shall  be  held  to  any  personal  liability 
under  or  by  reason  of  such  order,  contract  or  obligation, 
and  to  refer  or  cause  reference  to  be  made  to  this 
agreement. 

"Every  act  done,  power  exercised  or  obligation  as- 
sumed by  the  trustees  personally  under  the  provisions 
of  this  instrument  or  in  carrying  out  the  trusts  herein 
contained  shall  be  held  to  be  done,  exercised  or  as- 
sumed, as  the  case  may  be,  by  them  as  trustees  and 
not  as  individuals,  and  every  person  or  corporation 
contracting  with  the  trustees,  as  well  as  beneficiary 
hereunder,  shall  look  only  to  the  funds  and  property  of 
the  trust  for  payment  under  such  contract  or  for  the 
payment  of  any  debt,  mortgage,  judgment  or  decree, 
or  the  payment  of  any  money  that  may  otherwise  be- 
come due  or  payable  on  account  of  the  trusts  herein 
provided  for  or  any  other  obligation  arising  under  this 
agreement  in  whole  or  in  part  and  neither  the  trus- 
tees nor  the  shareholders,  present  or  future,  shall  be 
personally  liable  therefor. 

"  No  bond  or  surety  or  sureties  shall  ever  be  required 
of  any  trustee  acting  hereunder,  and  each  trustee 
shall  be  liable  only  for  his  own  acts,  and  then  only  for 
wilful  breach  of  trust." 

The  validity  and  effect  of  such  stipulations  will  be 
considered  later. 

§  12.   The  Law  Applicable  to  Informal  Associations 
for  Profit 

The  legal  problems  involved  in  the  form  of  organiza- 
tion in  which  associations  for  profit  originally  developed 
arc  few  and  simple.  These  associations  are  formed  by 
the  adoption  at  a  meeting  of  the  members  of  articles  of 

36 


Chap.  II]       LAW  OF  INFORMAL  ASSOCIATIONS  [§12 

association  or  a  constitution  and  by-laws.  Such  docu- 
ments closely  resemble  those  of  that  large  group  of 
social  and  fraternal  organizations  which  are  clearly 
not  partnerships,  as  we  shall  see  hereafter.^  The  dis- 
tinction between  partnerships  and  these  other  associa- 
tions is  that  the  purpose  of  the  former  is  the  pecuniary 
gain  of  the  members  ^  while  the  latter  are  non-profit  as- 
sociations. To  the  former  the  rules  of  partnership  are 
applicable,  to  the  latter  the  rules  of  agency  only.  In 
both  appears  the  element  of  association.  Though  there 
are  certain  kinds  of  associations  as  to  the  classification 
of  which  the  courts  have  differed  in  opinion,  that  is  as 
to  whether  they  were  profit  or  non-profit  associations,^ 
as  to  most  of  them  there  can  be  little  doubt.  When 
once  you  have  determined  that  one  of  these  associa- 
tions is  a  partnership,  moreover,  few  problems  arise  in 
the  application  to  it  of  the  rules  of  partnership.  From 
the  very  informality  of  their  organization,  no  attempt 
has  been  made  to  modify  by  agreement  the  usual  ob- 
ligations of  partners.  Many  of  the  rules  regarding 
membership  in  social  clubs  from  which  this  form  of 
organization  is  derived  are  held  applicable.  It  seems 
more  appropriate  to  discuss  these  rules  in  detail  when 
dealing  with  non-profit  associations.  Where  there  is 
provision  for  transferable  membership  or  shares  ques- 
tions arise  as  to  the  beginning  and  ending  of  partner- 

1  See  §  54. 
•  2  Tyrrell  v.  Washburn,  6  AUen  466;  Ashley  v.  DowUng,  203  Mass. 
311,  317,  89  N.  E.  434. 

3  See  §  54. 

Courts  have  differed  as  to  fraternal  insurance  orders.  One  was  held 
a  partnership  in  Babb  v.  Reed,  5  Rawle  151. 

One  court  seemed  to  assume  that  a  lodge  might  be  a  partnership. 
Whitcomb  v.  Smart,  38  Me.  264,  266. 

A  sociahstic  community  was  held  a  "universal  partnership." 
Goesele  v.  Bimeler,  5  McLean  223,  s.  c.  Fed.  Cas.  No.  5503,  aff'd 
14  How.  589. 

37 


§  12]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

ship  liability  which  will  be  treated  when  the  rules  ap- 
plicable to  all  associations  for  profit  are  considered,  but 
it  is  usually  held  that  such  an  association  is  still  a  part- 
nership in  spite  of  the  addition  of  this  feature  charac- 
teristic of  associations  but  unusual  in  ordinary  part- 
nerships.'* In  some  of  the  cases,  however,  there  are 
dicta   that   associations   for   profit   with   transferable 

*  T>Trell  V.  Washburn,  6  Allen  466. 

Joint  stock  companies  or  societies  which  are  not  sanctioned  ex- 
pressly by  the  legislature  pui'suant  to  some  general  or  special  law  are 
nothing  more  than  ordinary  partnerships  and  the  laws  respecting  them 
are  the  same.     Wells  v.  Gates,  18  Barb.  554. 

Association  to  build  a  slaughter  house.  Constitution  provided  that 
the  directors  should  not  incur  indebtedness  beyond  the  available 
capital  of  the  company  and  that  constitution  could  be  altered  at  any 
regular  meeting  by  two-thirds  vote.  Du-ectors  incurred  debts  in  con- 
struction of  building  and  sue  shareholders  for  indemnity.  Transfer- 
able shares.  Held:  "The  unincorporated  association  known  as  The 
Union  Pork-house  Company  is  to  be  regarded  as  merely  a  co-partner- 
ship and  subject  to  the  rules  governing  that  branch  of  the  law.  It  did 
not  lose  its  real  nature  as  a  partnership  because  certain  of  its  members 
were  constituted  du-ectors  and  its  members  were  called  stockholders 
and  a  constitution  and  by-laws  were  adopted  and  the  number  of  its 
members  was  large.  It  might  be  deemed  expedient  to  appoint  directors 
to  act  as  the  special  agents  for  managing  the  affairs  of  the  company 
instead  of  leaving  each  member,  as  in  an  ordinary  partnership,  to  act 
as  general  agent  for  the  transaction  of  business  in  the  ordinary  way. 
The  companj^  too,  might  be  a  partnership,  although  its  capital  stock 
be  divided  into  shares  which  by  the  articles  of  association  are  made 
transferable  on  the  books  of  the  company  "  (p.  526).  Hence  the  directors 
as  partners  could  not  bind  non-assenting  partners  to  liabilities  in  vio- 
lation of  the  constitution  and  that  could  be  amended  only  at  a  regular 
meeting  as  it  provided  (p.  528).  McFadden  v.  Leeka,  48  Ohio  St.  513. 
28  N.  E.  874. 

A  banking  association  had  transferable  shares,  but  by-laws  stipu- 
lated that  shares  could  not  be  transferred  without  consent  of  directors. 
In  an  action  by  the  bank's  trustee  on  a  note  defendant  pleaded  that 
he  had  taken  a  transfer  of  stock  from  a  member  on  the  understanding 
that  it  would  be  accepted  in  payment  of  the  note.  Held:  "While  such 
an  a.ssooiation  has  some  analogy  to  a  corjioration  in  its  by-laws  and 
rul(,'.s,  it  is  still  a  mere  parlner-sliip  and  these  laws  and  regulations  are 
analogous  to  the  terms  of  an  article  of  co-partnership  by  which  each 
mornb(!r  binds  himself  to  the  others."  "  In  buying  into  tlie  partnership, 
the  purc;lia,ser  of  the  sto(;k  i.s  bound  to  know  tiu^  rules  and  regulations 
wliidi  govern  it.  He  cannot  ask  to  be  made  a  partner  imless  upon  the 
terms  imposed  upon'  his  entrance  into  tlio  i)artnersl)ip."  Hence  he 
never  became  shareholder.    Logan  v.  McNaugiier,  88  Pa.  St.  103,  106. 

38 


Chap.  II]  LAW  OF  FORMAL  ASSOCIATIONS  [§  13 

shares,  sometimes  called  joint  stock  associations,  hold 
a  position  intermediate  between  corporations  and 
partnerships.^ 

§  13.  The  Law  Applicable  to  Formal  Associations 
for  Profit 

The  form  of  unincorporated  association  which,  it  is 
believed,  has  greatest  possibilities  of  future  develop- 
ment because  independent  of  legislative  authorization, 
is  the  association  organized  under  a  deed  of  trust  with 
transferable  shares  and  elaborate  provisions  for  limita- 
tion of  liability  of  the  shareholders.  These  associations 
have  evolved  from  the  ordinary  trust  created  by  will  or 
inter  vivos  for  the  benefit  of  a  class.  Since  some  of  them 
combine  the  elements  of  both  partnership  and  trust 
while  others  are  essentially  trusts  and  not  partner- 
ships, and  since  there  are  similar  relations  which  are 
merely  tenancies  in  common,  it  becomes  important  to 
examine  in  detail  the  distinctions  between  them. 

5  In  re  The  Associated  Trust,  222  Fed.  1012  (D.  C.  —  Mass.); 
Spottswood  V.  Morris,  12  Idaho  360,  85  Pac.  1094,  1102;  Hossack  v. 
Development  Association,  244  III.  274,  291,  91  N.  E.  439;  Cox  v.  Bod- 
fish,  35  Me.  302,  306;  Cincinnati  Co.  v.  Citizen's  Bank,  11  Ohio  Dec. 
50;  Tenney  v.  N.  E.  Protective  Union,  37  Vt.  64,  68. 

In  a  suit  by  heirs  to  establish  rights  in  an  insurance  certificate  of 
membership,  the  court  said:  "  Many  authorities  and  especially  the  older 
decisions  have  proceeded  on  the  idea  that  an  association  of  individuals 
must  either  be  a  corporation  or  an  absolute  partnership  and  this  was 
the  theory  upon  which  the  plaintiff  tried  this  case.  The  contention  of 
the  plaintiff's  counsel  is  that  the  members  of  this  association  in  so  far 
as  their  rights  in  themselves  are  involved  must  be  regarded  as  partners 
and  their  legal  liability  fixed  accordingly.  This  proposition  is  correct 
unless  by  the  by-laws  of  their  organization  the  pecuniary  liabihty  of 
the  members  is  hmited  and  is  only  to  be  enforced  in  a  certain  way  and 
upon  certain  contingencies.  .  .  .  The  by-laws  and  constitution  of 
such  a  society  constitute  a  contract.  It  is  the  province  of  the  courts 
to  enforce  and  give  effect  to  such  a  contract  according  to  its  evident 
meaning."    Hammerstein  v.  Parsons,  38  Mo.  App.  332,  335. 


39 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

§  14.  The  Distinction  between  Partnerships  and  Trusts 

It  is  frequently  a  difficult  problem  to  determine  the 
line  that  divides  the  partnership  from  the  trust. ^  The 
subject  has  been  most  frequently  considered  by  the 
English  courts  and  by  the  courts  of  Massachusetts. 
A  decision  by  Judge  Loring  of  the  Supreme  Judicial 
Court  of  the  latter  State  reviewed  the  previous  deci- 
sions and  for  the  first  time  defined  a  test  for  deter- 
mining the  nature  of  such  organizations.  We  there- 
fore quote  at  length  from  the  opinion. 

''Several  instances  of  such  partnerships  are  to  be 
found  in  our  reports.  In  Hoadley  v.  County  Commrs. 
of  Essex,  105  Mass.  519,  one  Gordon  McKay  executed 
a  declaration  of  trust  by  which  he  declared  that  he  held 
his  patents  for  sewing  the  soles  of  boots  and  shoes  to 
the  vamps,  his  factory  where  machines  were  manufac- 
tured under  these  patents  and  the  whole  business  there- 
tofore carried  on  by  him,  in  trust  for  such  persons  as 
should  buy  certificates  which  were  to  be  issued  under 
that  declaration  of  trust  to  the  amount  of  fifty  thou- 
sand in  number,  the  proceeds  to  be  used  in  carrying  on 
the  factory  and  business  assigned  to  and  held  by  the 
trustee.  The  certificate  holders  were  to  be  known  as 
the  McKay  Sewing  Machine  Association  and  the 
business  was  to  be  conducted  by  an  executive  committee 
to  be  chosen  by  them. 

"This  was  held  to  create  a  partnership,  and  for  that 

*  It  was  held  that  the  Sugar  Trust  was  a  partnership,  and  a  corpora- 
tion entering  the  partnership  ultra  vires  was  therefore  dissolved.  Peo- 
ple V.  North  River  Co.,  121  N.  Y.  582,  023,  24  N.  E.  834.  The  court 
rrifntioncd  but  did  not  deridt!  the  question  in  Htate  v.  Standard  Oil  Co., 
V.)  Ohif)  St.  137,  17(),  30  N.  Vj.  279.  Assoeiat-ions  engaged  in  trade  have 
long  hccii  ln'ld  j)artiicr,sliii).s  whether  their  jjroperty  was  vested  in  the 
a.s.s()ci;it  ion,  Aivord  v.  Siiiitli,  .I  Pick.  232,  23r),  Taft.  v.  Ward,  106  Mass. 
.^ilS,  or  in  trustees  for  il,  IMiilhps  v.  Hlatehford,  137  Mass.  510. 

■10 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

reason  the  shares  were  held  not  to  be  taxable  to  the 
holders  of  them.  For  a  subsequent  case  involving  the 
same  association,  where  the  same  conclusion  was 
reached,  see  Gleason  v.  McKay,  134  Mass.  419.  In 
Whitman  v.  Porter,  107  Mass.  522,  certain  subscribers 
associated  themselves  together  to  buy  a  ferry  boat  to 
be  run  between  Agawam  and  Springfield;  the  boat  was 
to  be  conveyed  to  one  of  the  subscribers  in  ''trust"  and 
the  entire  business  was  to  be  conducted  by  these  trus- 
tees and  their  officers  to  be  annually  elected  by  the 
subscribers.  The  stock  was  assignable.  These  stock- 
holders were  held  to  be  partners.  In  Phillips  v.  Blatch- 
ford,  137  Mass.  510,  the  money  to  carry  on  the  business 
of  manufacturing  and  selling  grates  was  raised  by  the 
sale  of  transferable  certificates  issued  under  a  some- 
what similar  declaration  of  trust  which  provided  that 
the  business  should  be  carried  on  by  a  board  of  managers 
of  whom  the  trustee  was  to  be  one,  and  the  other 
members  were  to  be  elected  by  the  shareholders. 
This  also  was  held  to  be  a  partnership.  In  Ricker  v. 
American  Loan  &  Trust  Co.,  140  Mass.  346,  the  doc- 
trine of  these  cases  was  extended  to  a  case  where  the 
purpose  of  the  association  was  to  buy  cars  to  be  leased 
to  a  specified  railroad.  The  persons  providing  the  pur- 
chase money  were  to  have  transferable  certificates, 
which  certificates  by  the  terms  of  the  lease  to  the  rail- 
road were  to  be  paid  in  ten  annual  instalments  with  six 
per  cent,  interest  until  paid.  The  certificate  holders 
were  declared  in  the  declaration  of  trust  to  be  an  asso- 
ciation, and  all  the  business  was  to  be  transacted  by  a 
board  of  managers  to  be  elected  by  them.  The  prop- 
erty of  the  association  was  to  be  held  by  the  American 
Loan  &  Trust  Company  as  trustee.    This  also  was  held 

41 


y( 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

to  be  a  partnership.  Williams  v.  Boston,  208  Mass. 
497,  was  a  similar  case.  The  trust  agreement  in  that 
case  provided  that  the  trust  was  established  "for  the 
purchase,  developriient  and  disposition  of"  the  former 
site  of  the  Museum  of  Fine  Arts  in  Boston.  The  prop- 
erty was  to  be  held  by  trustees,  but  the  shareholders 
had  a  right  to  remove  the  trustees,  and  meetings  of  the 
shareholders  were  to  be  held  at  which  the  shareholders 
might  authorize  or  instruct  the  trustees  in  any  manner 
and  alter  or  amend  the  declaration  of  trust,  or  direct 
the  trustees  to  end  the  trust,  sell  the  property  and  dis- 
tribute the  proceeds.  The  original  papers  in  the  case 
show  these  to  have  been  the  facts  of  the  case  although 
they  are  not  stated  in  the  report  of  that  decision.  The 
property  of  this  association  was  held  to  be  taxable  as 
partnership  property. 

''  In  ^Vlayo  v.  Moritz,  151  ]\Iass.481,  on  the  other  hand, 
it  was  held  that  certificate  holders  under  the  declara- 
tion of  trust  there  in  question  were  not  partners.  In 
that  case  an  inventor  transferred  his  invention  to  trus- 
tees to  whom  by  the  terms  of  the  trust  indenture  the 
patent  was  to  be  issued  when  it  was  issued.  The  trust 
indenture  provided  for  the  issue  of  scrip  to  those  who 
should  furnish  to  the  trustees  the  money  necessary  for 
the  more  advantageous  disposition  of  the  invention. 
The  trust  on  which  the  trustees  were  to  hold  the  inven- 
tion and  the  money  produced  by  the  issue  of  scrip  was 
to  hold,  manage  and  dispose  of  the  invention  or  any 
part  thereof  or  interest  therein  upon  such  terms  as  to 
them  (the  trustees)  or  a  majority  of  them  should  seem 
best,  the  net  proceeds  to  be  paid  one-half  to  the  inven- 
tor and  the  other  half  to  the  holders  of  the  scrip  or  cer- 
tificates.   The  scrip,  called  in  the  trust  indenture  scrip 

42 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§14 

or  certificates,  was  transferable.  Vacancies  in  the 
office  of  trustees  were  to  be  filled  by  the  remaining 
trustees.  It  was  held  that  the  scrip  holders  were  not 
partners,  and  in  that  respect  the  case  was  unlike 
Gleason  v.  McKay,  134  Mass.  419,  and  Phillips  v. 
Blatchford,  137  Mass.  510. 

"  The  difference  between  Hoadley  v.  County  Commrs., 
105  Mass.  519  (involving  the  same  indenture  as  that  in 
Gleason  v.  McKay,  134  Mass.  419),  Whitman  v.  Porter, 
107  Mass.  522,  Phillips  v.  Blatchford,  137  Mass.  510, 
Ricker  v.  American  Loan  &  Trust  Co.,  140  Mass.  346, 
and  Williams  v.  Boston,  208  Mass.  497,  on  the  one  hand, 
and  Mayo  v.  Moritz,  151  Mass.  481,  on  the  other  hand, 
lies  in  the  fact  that  in  the  former  cases  the  certificate 
holders  are  associated  together  by  the  terms  of  the 
''trust"  and  are  the  principals  whose  instructions  are 
to  be  obeyed  by  their  agent  who  for  their  convenience 
holds  the  legal  title  to  their  property.  The  property  is 
their  property.  They  are  the  masters.  While  in  Mayo 
V.  Moritz  on  the  other  hand,  there  is  no  association  be- 
tween the  certificate  holders.  The  property  is  the  prop- 
erty of  the  trustees  and  the  trustees  are  the  masters. 
All  that  the  certificate  holders  in  Mayo  v.  Moritz  had 
was  a  right  to  have  the  property  managed  by  the  trus- 
tees for  their  benefit.  They  had  no  right  to  manage  it 
themselves  nor  to  instruct  the  trustees  how  to  manage 
it  for  them.  As  was  said  by  C.  Allen,  J.,  in  Mayo  v. 
Moritz,  151  Mass.  481,  484:  ''The  scrip  holders  are 
cestuis  que  trust  and  are  entitled  to  their  share  of  the 
avails  of  the  property  when  the  same  is  sold,"  and  that 
is  all  to  which  they  were  entitled.  In  Mayo  v.  Moritz 
the  scrip  holders  had  a  common  interest  in  the  trust 
fund  in  the  same  sense  that  the  members  of  a  class  of 

43 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

life  tenants  and  the  members  of  a  class  of  remainder- 
men (among  whom  the  income  of  a  trust  fund  and  the 
corpus  are  to  be  distributed  respectively)  have  a 
common  interest.  But  in  Mayo  v.  Moritz  there  was  no 
association  among  the  certificate  holders  just  as  there 
is  no  association  although  a  common  interest  among  the 
life  tenants  or  the  remaindermen  in  an  ordinary  trust. 
For  a  decision  in  this  Commonwealth  somewhat  like 
Mayo  V.  Moritz,  uhi  supra,  see  Hussey  v.  Arnold,  185 
y  Mass.  202.  See  also  in  this  connection  Makin  v.  Sav. 
Inst.,  23  Me.  350;   Burt  v.  Lothrop,  52  Mich.  106. 

''There  is  a  case  in  England  (Smith  v.  Anderson,  15 
Ch.  D.  247)  in  which  the  distinctions  between  cases 
like  Hoadley  v.  County  Commrs.  and  Mayo  v.  Moritz 
was  pointed  out  and  established,  and  that  case  is  now 
the  established  law  in  England.  In  Smith  v.  Ander- 
son (decided  by  the  Court  of  Appeals  in  1880),  the 
trust  deed  provided  for  the  purchase  by  trustees  of 
shares  in  the  capital  stock  of  eleven  different  sub- 
marine telegraph  companies.  The  money  was  to  be 
furnished  by  subscribers  to  whom  transferable  certifi- 
cates were  to  be  issued.  The  income  derived  from  the 
submarine  shares  and  the  proceeds  of  any  sales  of  them 
were  to  be  applied  by  the  trustees  (1)  in  paying  six  per 
cent,  interest  on  the  trust  certificates  issued  under  the 
trust;  (2)  in  redeeming  these  trust  certificates  at  £120; 
and  finally,  when  (3)  all  the  certificates  had  been  re- 
deemed, the  surplus,  if  any,  was  to  be  divided  among 
the  former  certificate  holders.  It  was  held  that  this  was 
a  trust  and  not  a  company,  association  or  partnership 
which  had  to  be  registered  under  companies  act  of  1862 
(25  &  26  Vict.  c.  89)  §  4.  That  act  provided  that 
"No  company,  association  or  partnership  .  .  .  shall  be 

44 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§14 

formed  .  .  .  for  the  purpose  of  carrying  on  any  other 
business  (that  is  to  say,  any  business  other  than  bank- 
ing) that  had  for  its  object  the  acquisition  of  gain  by 
the  company,  association  or  partnership,  or  by  the  in- 
dividual members  thereof  unless  it  is  registered."  This 
conclusion  was  reached  on  the  ground  that  there  is  a 
difference  between  a  partnership  where  money  raised 
by  the  issue  of  transferable  certificates  is  to  be  held  by 
so-called  trustees  who  are  really  managing  agents  and 
a  trust  where  money  raised  by  the  issue  of  transferable 
certificates  is  to  be  held  by  trustees  properly  so-called, 
and  that  the  distinction  between  the  two  is  that  which 
we  have  just  stated  in  detail. 

''The  decision  in  Smith  v.  Anderson  is  the  law  of 
England  to-day,  although  by  reason  of  some  special 
facts  in  that  case  and  the  way  in  which  the  question 
arose  doubts  as  to  the  conclusion  reached  in  that  case 
have  been  thrown  out  by  two  or  three  individual  judges. 
For  the  subsequent  cases  see  Crowther  v.  Thorley,  32 
W.  R.  330;  In  re  Siddall,  29  Ch.  D.  1;  In  re  Jones 
(1898)  2  Ch.  83,  91.  For  two  cases  where  the  distinc- 
tion between  managing  agents  who  hold  the  legal  title 
and  trustees  properly  so-called  is  reaffirmed,  see  In  re 
Thomas,  14  Q.  B.  D.  379,  383;  In  re  Faure  Electric 
Accumulator  Co.,  40  Ch.  D.  141,  151,  152. 

"  This  brings  us  to  the.  question  of  the  character  of  the 
Boston  Personal  Property  Trust.  It  is  plain  that  it  is  a 
trust  and  not  a  partnership.  By  the  terms  of  the  inden- 
ture of  trust  the  property  contributed  by  the  certifi- 
cate holders,  or  that  bought  with  money  contributed 
by  them  (the  original  trust  property  could  be  acquired 
in  both  ways  by  the  terms  of  the  indenture  of  trust), 
was  to  be  held  by  the  trustees  in  trust  to  pay  the  income 

45 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

to  the  holders  of  the  certificates,  and  on  the  termina- 
tion of  the  trust  to  divide  the  trust  fund  or  the  pro- 
ceeds thereof  among  them.  The  certificate  holders  are 
throughout  called  cestuis  que  trustent.  The  certifi- 
cate holders,  or  cestuis  que  trustent,  are  in  no  way 
associated  together,  nor  is  there  any  provision  in  the 
indenture  of  trust  for  any  meeting  to  be  held  by  them. 
The  only  act  which  (under  the  trust  indenture)  they 
can  do  is  to  consent  to  an  alteration  or  amendment  of 
the  trust  created  by  the  indenture  or  to  a  termination 
of  it  before  the  time  fixed  in  the  deed.  But  they  cannot 
force  the  trustees  to  make  such  alteration,  amendment 
or  termination.  It  is  for  the  trustees  to  decide  whether 
they  will  do  any  one  of  these  things.  All  that  the  cer- 
tificate holders  or  cestuis  que  trustent  can  do  is  to 
give  or  withhold  their  consent  to  the  trustees  taking 
such  action.  And  the  gi\dng  or  withholding  of  consent 
by  the  cestuis  que  trust  is  not  to  be  had  in  a  meeting, 
but  is  to  be  given  by  them  individually.  As  we  have 
said,  no  meeting  of  the  cestuis  que  trust  for  that  or  any 
other  purpose  is  provided  for  in  the  trust  indenture. 
The  trustees  of  the  Boston  Personal  Property  Trust 
have  a  right  to  sell  the  trust  securities  and  re-invest  the 
proceeds,  and  also  a  hmited  power  to  borrow  on  the 
security  of  the  trust  property.  The  certificate  holders, 
or  cestuis  que  trustent  as  they  are  called  in  the  trust 
deed,  have  a  common  interest  in  precisely  the  same 
sense  that  the  members  of  a  class  of  life  tenants  (among 
whom  the  income  of  a  trust  fund  is  to  be  distributed) 
have  a  common  interest,  but  they  are  not  socii,  and  it 
is  the  trustees,  not  the  certificate  holders,  who  are  the 
masters  of  the  trust  property.  The  sole  right  of  the 
cestuis  que  trust  is  to  have  the  property  administered 

46 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

in  their  interest  by  the  trustees,  who  are  the  masters, 
to  receive  income  while  the  trust  lasts  and  their  share 
of  the  corpus  when  the  trust  comes  to  an  end." 

''It  was  stated  in  a  passing  remark  made  by  this  court 
in  Williams  v.  Johnson,  208  Mass.  544,  552,  that  in  the 
trust  before  the  court  in  that  case  the  certificate  hold- 
ers were  partners  within  the  meaning  of  that  word  in 
St.  1909,  c.  490,  Part  I,  §  27.  While  that  trust  provided 
for  meetings  of  the  shareholders  and  in  that  respect  for 
some  association  of  and  among  them,  an  examination 
of  the  original  papers  shows  that  it  was  a  trust  and  not 
a  partnership.  This  remark  was  in  no  way  essential 
to  the  decision  in  Williams  v.  Johnson."  ^ 

The  essential  characteristics  of  an  association  for 
profit,  as  defined  by  Judge  Loring,  which  distinguish 
it  from  a  trust  are  (1)  the  association  of  the  benefici- 
aries, (2)  their  power  as  principals  to  control  the  man- 
agement of  the  property  by  the  trustees,  their  agents. 

It  has  been  well  said  by  a  distinguished  authority 
that  an  exact  definition  of  partnership  at  common  law 
is  impossible.^  The  most  effective  method  of  analysis 
is  therefore  to  determine  the  characteristics  which  dis- 
tinguish partnership  from  other  similar  relations. 
Both  partnership  and  trust  have  for  their  purpose  the 
pecuniary  gain  of  the  members.  In  a  partnership,  how- 
ever, the  partners  stand  towards  that  enterprise  in  the 
relation  of  co-proprietors^  and  that  is  the  relation  of 
the  certificate  holders  in  associations  for  profit  towards 
the  business  of  the  association.  It  is  evidenced  by  their 
power  to  control  the  operations  of  the  enterprise  through 

2  WiUiams  v.  Milton,  215  Mass.  1,  6,  12,  102  N.  E.  355. 

'  Lindley,  Partnership,  Vol.  I,  p.  1. 

*  Estabrook  v.  Woods,  192  Mass.  499,  502,  78  N.  E.  538. 

47 


y 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

their  control  of  the  trustees.  In  a  trust  the  benefici- 
aries have  only  the  right  to  compel  the  trustee  to  ac- 
count^ and  to  charge  him  with  the  consequences  of 
dishonesty  or  neglect  ^  and  cause  his  removal  for  the 
one  offense  or  the  other. '^  Within  these  broad  limits 
the  trustee  alone  is  to  determine  the  method  of  carry- 
ing out  the  purposes  of  the  trust.  ^  Most  rules  of  the 
law  of  partnership  are  easier  to  state  than  to  apply. 
The  tests  laid  down  by  Judge  Loring  will  require  still 
further  definition.  How  much  control  by  the  benefici- 
aries over  the  trustee  is  needed  to  change  a  trust  into  a 
partnership?  Under  many  of  these  deeds  of  trust  the 
only  way  in  which  the  shareholders  can  expressly  con- 
trol the  action  of  the  trustee  is  thi'ough  their  power  of 
election  at  the  annual  meeting.  This  indeed  may  prove 
in  practice  a  very  effectual  power  to  direct  his  action 
during  his  term  of  office,  but  does  it  come  within  Judge 
Loring' s  definition  of  a  partnership?  ^ 

A  later  decision  of  the  Massachusetts  court  in  draw- 
ing the  distinction  between  trust  and  partnership  em- 
phasizes control  and  omits  all  reference  to  the  element 
of  association.  No  issue  was  involved  in  the  case  re- 
quiring a  decision  on  this  point  and  it  is  wholly  uncer- 
tain whether  the  omission  was  accidental  or  delib- 
erate.   The  court  said: 

''A  declaration  of  trust  or  other  instrument  provid- 
ing for  the  holding  of  property  by  trustees  for  the  bene- 

»  Weaver  v.  Fisher,  110  111.  146;  Hayes  v.  IlaU,  188  Mass.  510,  512, 
74  N.  K.  !W5. 

•  Barker  v.  Barker,  14  Wis.  131. 

■>  Scott  V.  Rand,  US  Mass.  215. 

«  Life  Ass'n  of  Scotland  v.  Siddal,  3  DeG.  F.  &  J.  58,  74. 

»  See  tlie  opinion  of  Morton,  J.  In  re  The  Associated  Trust, 
222  Fed.  1012  (D.  C.  —  Mass.)  and  §  16  vost.  Sec  also  Smith  v.  An- 
derson, 15  Ch.  D.  247,  284;  Hart  v.  Seymour,  147  111.  598,  35  N.  E. 
246. 

48 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

fit  of  the  owners  of  assignable  certificates  representing 
the  beneficial  interest  in  the  property  may  create  a 
trust  or  it  may  create  a  partnership.  Whether  it  is  the 
one  or  the  other  depends  upon  the  way  in  which  the 
trustees  are  to  conduct  the  affairs  committed  to  their 
charge.  If  they  act  as  principals  and  are  free  from  the  \ 
control  of  the  certificate  holders,  a  trust  is  created; 
but  if  they  are  subject  to  the  control  of  the  certificate 
holders,  it  is  a  partnership.  That  was  explained  at 
length  in  Williams  v.  Milton,  215  Mass.  1.  Tested  by 
the  principles  there  laid  down,  the  Buena  Vista  Fruit 
Company  is  a  partnership  and  not  a  trust.  It  is  a  vol- 
untary association  organized  under  two  instruments, 
one  called  a  'declaration  of  trust'  and  the  other  'by- 
laws.' These  two  instruments  provide  that  the  share- 
holders representing  two-thirds  in  value  of  outstanding 
shares  have  power  to  remove  either  or  all  of  the  trustees 
at  any  time,  without  assigning  any  cause,  and  to  appoint 
others  to  fill  the  vacancy ;  to  terminate  the  trust  at  any 
time  earlier  than  that  limited  for  its  duration  in  the  dec- 
laration of  trust,  and  to  terminate  it  by  requiring  convey- 
ance of  the  property  to  other  trustees  upon  new  trusts^^_ 
or  to  a  corporation.  A  majority  of  the  shareholders  at 
any  time  by  vote  may  amend  the  declaration  of  trust. 
The  by-laws  may  be  'altered,  amended,  repealed'  by 
vote  of  the  majority  of  the  shareholders  'at  any  annual 
or  special  meeting  of  the  .  .  .  shareholders.'  These  pro- 
visions demonstrate  that  this  association  is  a  partner- 
ship and  not  a  trust."  ^° 

It  would  seem  that  the  element  of  association  is  essen-  -+- 
tial  to  a  partnership.   Indeed  it  is  at  the  very  basis  of  the 
conception  of  an  ordinary  partnership.     The  power  to 

10  Frost  V.  Thompson,  219  Mass.  360,  106  N.  E.  1009.  4. 

49 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

control  the  acts  of  trustees  or  agents  follows  as  a  conse- 
quence of  the  existence  of  another  essential  element  of 
the  partnership  relation,  that  of  co-proprietorship  of  the 
business  enterprise.  It  is  to  be  hoped,  therefore,  that 
the  restatement  of  the  law  attempted  in  the  opuiion  ui 
Frost  V.  Thompson  will  not  be  regarded  by  the  court 
hereafter  as  ia  any  way  modifying  the  definition  of 
Judge  Loring  in  Williams  v.  ]\Iilton.  The  opinion  pro- 
ceeds to  state  as  a  further  ground  for  its  decision 
that  the  notes  in  suit  were  not  the  notes  of  the  trustees, 
but  notes  of  the  treasurer  of  the  association  made  in 
accordance  wdth  the  by-laws,  which  provided  that  he 
should  ''make,  sign,  endorse  and  accept  for  and  in  the 
name  and  behalf  of  the  company,  promissory  notes, 
drafts  and  checks  in  the  regular  course  of  its  business." 
Had  these  been  notes  of  a  treasurer,  elected  by  the 
shareholders  and  not  a  trustee,  it  would  be  clear  that 
the  shareholders  would  be  liable  for  his  acts  as  partners. 
The  issue  is  confused  by  the  fact  that  the  report  of  this 
case  refers  to  two  documents,  one  a  declaration  of  trust, 
the  other  by-laws,  but  nowhere  explains  the  relation  be- 
tween the  two.  This  is  probably  due  to  the  fact  that 
the  original  papers  in  the  case  disclose  no  express  alle- 
gation or  finding  on  this  point.  From  an  examination 
of  the  by-laws  themselves  which  are  printed  in  full  in 
the  Appendix, ^^  it  is  plain,  however,  that  the  by-laws 
were  the  by-laws  of  the  trustees  and  not  of  the  share- 
holders and  that  the  treasurer  was  an  agent  of  the 
trustees  and  a  member  of  the  Executive  Board  ap- 
pointed by  the  trustees,  so  that  although  the  by-laws 
authorized  him  to  sign  notes  on  behalf  of  the  "Com- 
pany," this  must  be  deemed  the  trade  name  of  the 

"  See  p.  363. 
50 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

trustees  whose  agent  he  was  and  not  of  the  share- 
holders. 

The  statement  that  the  organization  was  a  partner- 
ship, therefore,  must  be  sustained  if  at  all  by  reason  of 
the  provisions  in  the  declaration  of  trust  which  is 
printed  in  full  in  the  Appendix. ^^  The  provisions  re- 
ferred to  by  the  court  are  (1)  the  power  to  remove  trus- 
tees at  any  time  without  cause  and  fill  the  vacancies; 
(2)  power  to  end  the  trust  at  any  time;  (3)  power  to 
amend  the  declaration  of  trust  at  any  time.  There  was 
apparently  no  provision  for  stated  election  of  trustees. 

In  determining  whether  mere  power  to  elect  trus- 
tees gives  the  right  to  control  which  makes  the  trustees 
agents  of  a  partnership,  we  must  first  consider  a  little 
more  carefully  what  is  meant  by  right  to  control.  This 
phrase  has  been  used  to  define  another  distinction,  that 
between  the  relation  of  principal  and  agent  and  that  of 
independent  contractors  in  the  ''loaned  servant"  cases. 
As  there  set  forth,  the  relation  is  that  of  agency  if  the 
employer  has  a  right  not  merely  to  have  certain  results 
accomplished  but  the  right  to  direct  in  detail  the  method 
by  which  such  results  are  to  be  attained. 

"In  determining  whether  in  a  particular  act,  he  is 
the  servant  of  the  original  master  or  of  the  person  to 
whom  he  has  been  furnished,  the  general  test  is  whether 
the  act  is  done  in  business  of  which  the  person  is  in 
control  as  proprietor  so  that  he  can  at  any  time  stop  it 
or  continue  it,  and  determine  the  way  in  which  it  shall 
be  done,  not  merely  in  reference  to  the  result  to  be 
reached,  but  in  reference  to  the  method  of  reaching  the 
result.  Is  this  person  the  proprietor  of  the  business  in 
which  the  act  is  done?    By  this  is  meant  not  merely  the 

12  Seep.  367. 
51 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

general  business  which  the  act  is  intended  to  promote, 
but  the  particular  business  which  calls  for  the  act,  in 
the  smallest  subdivision  that  can  be  made  of  the  busi- 
ness in  reference  to  control  and  proprietorship."  ^^ 

In  an  ordinary  partnership  it  is  clear  that  each  part- 
ner has  such  a  right  to  direct  the  agents  of  the  firm 
except  that  in  cases  of  dispute  the  will  of  the  majority 
prevails.  In  associations,  by  agreement,  the  share- 
holders always  act  by  a  majority  vote.  If  this  test  is 
to  be  applied  in  the  same  sense  in  defining  the  distinc- 
tion between  partnership  and  trust,  it  would  follow 
that  only  those  associations  are  partnerships  in  which' 
the  shareholders  have  the  right  at  any  time  to  direct 
the  conduct  of  the  business  bj''  the  trustees  in  matters 
of  detail,  a  right  not  enjoyed  by  stockholders  in  cor- 
porations. In  some  deeds  of  trust  such  power  has  been 
affirmatively^  given  to  the  shareholders.^^  In  most  of 
them  it  has  not  been  expressly  given.  Can  the  existence 
of  the  power  be  implied  from  the  express  power  to 
elect  at  stated  intervals  the  trustees  of  the  associa- 
tion? If  we  are  applying  by  analogy  the  distinction 
between  agency  and  independent  contract  the  answer 
must  be  no,  for  this  is  no  more  than  the  right  of  any 
proprietor  to  select  his  owm  independent  contractor  for 
each  specific  job.  The  right  to  remove  a  trustee  during 
his  term  without  cause  would  not  ordinarily  be  a  right 
possessed  by  the  proprietor  in  dealing  with  liis  independ- 
ent contractor,  but  might  exist  by  express  agreement 
between  them  and  still  would  not  change  their  relation, 
while  it  existed,  from  that  of  independent  contractors 

'»  Shrpard  v.  Jacobs,  204  Ma.ss.  110,  112,  90  N.  E.  392. 

>«  Hart  V.  Seymour,  147  111.  .598,  609,  35  N.  E.  240.  Sec  Declaration 
of  TruHt  of  the  Copley  Square  Tru.st  construed  in  Williams  v.  Boston, 
208  Mass.  497,  94  N.  E.  808,  jjrinted  in  the  Appendix  at  p.  333. 

52 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

to  that  of  principal  and  agent.  The  following  cases  on 
what  is  popularly  known  as  ''stock  control"  of  cor- 
porations are  of  interest  in  this  connection. 

An  action  was  brought  on  a  contract  by  a  railroad 
company  to  haul  plaintiff's  cars  over  all  lines  of  its 
road  and  over  all  roads  which  it  then  controlled  or 
might  thereafter  control  by  ownership,  or  lease  or 
otherwise.  The  Supreme  Court  of  the  United  States 
held  that  the  defendant  was  not  bound  to  haul  cars 
over  a  road  of  which  the  defendant  owned  nearly  all 
the  stock. 

*'We  are  also  of  opinion  that  the  railroad  of  the  St. 
Louis,  Iron  Mountain  and  Southern  Company  is  not 
controlled  by  the  present  Missouri  Pacific  Company 
in  such  a  way  as  to  require  that  company  to  haul  the 
Pullman  cars  over  it,  if  the  contract  is  binding  on  the 
new  company  to  the  same  extent  it  would  be  on  the  old 
were  that  company  still  in  existence  and  standing  in 
the  place  of  the  new.  Confessedly  the  St.  Louis,  Iron 
Mountain  and  Southern  Company  keeps  up  its  own 
corporate  organization.  It  operates  its  own  road.  It 
has  its  own  officers  and  makes  its  own  bargains.  The 
Missouri  Pacific  owns  all,  or  nearly  all  its  stock,  and 
in  that  way  can  determine  who  shall  constitute  its 
board  of  directors,  but  there  the  power  of  that  com- 
pany over  the  management  stops.  The  board  when 
elected  has  controlling  authority,  and  for  its  doing  is 
not  necessarily  answerable  to  the  Missouri  Pacific 
Company.  The  two  roads  are  substantially  owned  by 
the  same  persons  and  operated  in  the  same  interest, 
but  that  of  the  St.  Louis,  Iron  Mountain  and  Southern 
Company  is  in  no  legal  sense  controlled  by  the  Missouri 
Pacific. 

53 


-^ 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

"It  is  true  the  bill  avers  in  many  places  and  in  many- 
ways  that  the  purchase  of  the  stock  of  the  St.  Louis, 
Iron  Mountain  and  Southern  Company  was  made  by 
the  Missouri  Pacific  Company  for  the  purpose  and  with 
the  intent  of  getting  the  control  of  the  road  of  the  St. 
Louis,  Iron  Mountain  and  Southern,  and  that  the  case 
is  before  us  on  demurrer  to  the  bill.  A  demurrer  admits 
all  facts  stated  in  the  bill  which  are  well  pleaded,  but 
not  necessarily  all  statements  of  conclusions  of  law. 
What  was  actually  done  is  stated  clearly  and  distinctly. 
The  effect  of  what  was  done  is  a  question  of  law,  not  of 
fact.  It  is  a  matter  of  no  importance  what  the  purpose 
X  of  the  parties  was  if  what  they  did  was  not  sufficient 
in  law  to  accomplish  what  they  wanted.  When  there 
is  doubt,  the  purpose  and  intention  of  the  parties  may 
sometimes  aid  in  explaining  what  was  done,  but  here 
there  is  no  need  of  explanation.  The  Missouri  Pacific 
Company  has  bought  the  stock  of  the  St.  Louis,  Iron 
Mountain  and  Southern  Company,  and  has  effected  a 
satisfactory  election  of  directors,  but  this  is  all.  It 
has  all  the  advantages  of  a  control  of  the  road,  but  that 
is  not  in  law  the  control  itself.  Practically  it  may  con- 
trol the  company,  but  the  company  alone  controls  its 
road.  In  a  sense,  the  stockholders  of  a  corporation 
own  its  property,  but  they  are  not  the  managers  of  its 
business  or  in  the  immediate  control  of  its  affairs. 
Ordinarily  they  elect  the  governing  body  of  the  corpo- 
ration, and  that  body  controls  its  property.  Such  is 
the  case  here.  The  Missouri  Pacific  Company  owns 
enough  of  the  stock  of  the  St.  Louis,  Iron  Mountain 
and  Southern  to  control  the  election  of  directors,  and 
this  it  has  done.  The  directors  now  control  the  road 
through  their  own  agents  and  executive  officers,  and 

54 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

these  agents  and  officers  are  in  no  way  under  the  direc- 
tion of  the  Missouri  Pacific  Company.  If  they  or  the 
directors  act  contrary  to  the  wishes  of  the  Missouri 
Pacific  Company,  that  company  has  no  power  to  pre- 
vent it,  except  by  the  election,  at  the  proper  time  and 
in  the  proper  way,  of  other  directors,  or  by  some  judi- 
cial proceeding  for  the  protection  of  its  interest  as  a 
stockholder.  Its  rights  and  its  powers  are  those  of  a 
stockholder  only.  It  is  not  the  corporation,  in  the 
sense  of  that  term  as  applied  to  the  management  of  the 
corporate  business  or  the  control  of  the  corporate  prop- 
erty." 1^ 

This  case  was  cited  with  approval  in  the  following 
dictum:  "The  mere  fact  that  Crawford  owned  a  ma- 
jority of  the  stock  did  not  give  him  the  legal  control  of 
the  company;  nor  from  such  ownership  can  the  legal 
inference  be  drawn  that  he  dominated  the  board  of 
directors."  ^^ 

In  a  case  which  held  that  a  railroad  company  was  not 
doing  business  in  the  State  merely  because  it  owned 
practically  the  entire  capital  of  a  railroad  which  did  do 
business  there,  the  court  said: 

"Is  it  true  that  the  Gulf  Company  was  the  agent  of 
the  Pacific  Company  or  its  mere  creature  in  such  a 
sense  that  to  serve  it  is  equivalent  to  serving  the  con- 
trolling company?  It  is  a  fact  that  both  companies 
had  common  agents  and  employees  to  a  certain  extent, 
but  the  record  shows  that  such  employees  were  paid 
in  proportion  to  the  business  done  for  each  company. 
And  that  while  in  the  service  of  the  companies  respec- 
ts Pullman  Car  Co.  v.  Missouri  Pacific  Ry.  Co.,  115  U.  S.  587,  596, 
29  L.  ed.  499,  6  S.  Ct.  194. 

16  Porter  v.  Pittsburg  Co.,  120  U.  S.  649,  670,  30  L.  ed.  830,  7  S.  Ct. 
741. 

55 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

tively  they  were  under  the  exclusive  management  and 
control  of  the  company  in  whose  service  they  were 
engaged,  with  no  power  to  discharge  or  employ,  the  one 
company  for  the  other;  and  that,  although  the  serv- 
ice was  in  a  sense  common,  it  was  kept  distinct  and 
separate  in  the  control  and  payment  of  the  employees 
while  in  the  separate  service  of  the  respective  com- 
panies. 

"It  is  true  that  the  Pacific  Company  practically  owns 
the  controlling  stock  in  the  Gulf  Company,  and  that 
both  companies  constitute  elements  of  the  Rock  Island 
System.  But  the  holding  of  the  majority  interest  in 
the  stock  does  not  mean  the  control  of  the  active  officers 
and  agents  of  the  local  company  doing  business  in 
Texas.  That  fact  gave  the  Pacific  Company  the  power 
to  control  the  road  by  the  election  of  the  directors  of 
the  Gulf  Company,  who  could  in  turn  elect  officers  or 
remove  them  from  the  places  already  held;  but  this 
power  does  not  make  it  the  company  transacting  the 
local  business. 

''This  record  discloses  that  the  officers  and  agents 
of  the  Gulf  Company  control  its  management.  The 
fact  that  the  Pacific  Company  owns  the  controlling 
amounts  of  the  stock  of  the  Gulf  Company  and  has 
thus  the  power  to  change  the  management  does  not  give 
it  present  control  of  the  corporate  property  and  busi- 
ness." '' 

We  are,  nevertheless,  conscious  that  as  a  practical 
matter  the  power  to  elect  the  trustees  at  stated  intervals 
and  especially  the  power  to  remove  them  without  cause 
give  real  control  of  the  conduct  of  the  enterprise  just  as 

'7  Peterson  v.  Chicago,  etc.  Ry.  Co.,  205  U.  S.  364,  390,  51  L.  ed. 
841,  27  S.  Ct.  513. 

56 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

a  majority  of  shares  in  a  corporation  give  practical  con- 
trol of  its  policy,  though  the  directors  of  a  corporation 
are  not  strictly  agents  of  the  shareholders.  This  sug- 
gests that  perhaps  there  is  some  defect  in  our  defini- 
tion. Frequently  in  the  development  of  the  law  of 
partnership,  the  courts,  in  their  efforts  to  define  the  re- 
lation in  the  terms  of  other  relations,  have  mistaken 
effect  for  cause.  In  the  famous  case  of  Cox  v.  Hick- 
man ^^  the  agency  of  the  partners  was  declared  the  fun- 
damental test  of  the  relation  of  partnership  when,  in- 
deed, it  was  only  a  legal  consequence  from  the  existence 
of  that  relation.  Here  again  we  are  in  danger  of  a  like 
error.  The  power  to  direct  and  control  in  partnership 
is  a  legal  consequence  of  the  proprietorship  of  the  busi- 
ness by  the  partners.  It  is  an  element  to  be  considered 
with  others  in  helping  us  to  decide  whether  that  pro- 
prietorship exists  or  not,  but  is  not  itself  the  final' test. 
This  is  the  essence  of  Judge  Loring's  distinction.  J 

Trustees,  not  their  beneficiaries,  are  proprietors  of 
their  business  enterprises.  Corporations,  not  their 
shareholders,  are  proprietors  of  the  corporate  business. 
In  the  present  state  of  the  common  law  we  must  say 
that  the  partners  as  individuals,  but  jointly,  are  pro- 
prietors of  the  business  of  an  ordinary  partnership. 
The  trustees  of  the  organizations  we  are  now  consider- 
ing are  in  this  sense  the  proprietors  of  the  property  of 
the  organization.  This  at  least  creates  a  presumption 
that  they  are  proprietors  of  its  business  enterprise.  The  "1 
power  to  change  trustees  at  stated  intervals  or  to  fill 
vacancies  as  they  occur  should  not,  it  is  submitted,  be 
deemed  sufficient  to  transfer  that  proprietorship  to  the 
shareholders.    It  is  not  inconceivable  that  a  trust  under 

18  8  H.  L.  C.  268. 
57 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

a  will  might  provide  expressly  for  the  designation  of 
future  trustees  by  the  beneficiaries,  as  they  do  now  in 
effect.  It  is  still  plainer  that  the  power  to  fill  va- 
cancies as  they  occur,  but  not  at  stated  intervals,  is 
not  sufficient  evidence  of  proprietorship  to  create  a 
partnership.  This  was  the  extent  of  the  power  in  the 
deed  in  question  in  Smith  v.  Anderson  where  it  was  held 
a  trust. ^^  The  power  to  remove  at  any  time  without 
cause  and  to  fill  vacancies  seems,  however,  of  a  totally 
different  sort.  It  is  difficult  to  conceive  of  independent 
action  by  a  trustee  under  such  circumstances  and  ab- 
sm-d  to  say  that  he  is  the  proprietor  of  the  enterprise 
even  while  his  incumbency  continues.  On  this  view  the 
decision  in  Frost  v.  Thompson,  supra,  is  justified. 

The  power  to  amend  the  declaration  of  trust  has 
been  emphasized  as  proving  the  existence  of  the  power 
to  control  and,  therefore,  of  partnership.  If  the  in- 
strument would  otherwise  be  deemed  to  create  a  trust, 
it  cannot  be  that  the  mere  power  to  change  the  in- 
strument makes  it  before  such  change  a  partnership. 
The  right  to  change  a  trust  into  a  partnership  pre- 
supposes that  until  that  change  it  remains  a  trust. 
This  common  provision  in  the  instruments  we  are 
considering  is,  therefore,  of  no  value  in  determining 
their  true  classification. 

The  real  cause  of  difficulty  in  this  problem  is  due  to  a 
conflict  between  the  natural  desire  of  courts  to  effectu- 
ate the  honest  intent  of  business  men  and  the  assumed 
necessity  of  applying  to  a  problem  sui  generis  analo- 
gies from  other  fields  of  the  law.  The  very  difficulty  of 
securely  placing  these  associations  in  the  domain  of 
either  partnership  or  trust  suggests  that  they  may  be- 

"•  lo  Ch.  D.  247,  284. 
58 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

long  in  neither.  In  dealing  with  corporations  the  pecu- 
liarities of  the  situation  have  been  recognized  by  the 
courts  and  a  new  relation  has  been  created  that  of  di- 
rector and  stockholder  and  the  rights  and  duties  of  this 
relation  have  become  a  body  of  law  by  themselves. 
May  it  not  be  that  the  true  solution  of  the  problem 
now  under  consideration  lies  in  the  recognition  by  the 
courts  of  the  association  as  an  organization  inter- 
mediate between  partnership  and  corporation  and 
distinct  from  pure  trusts  with  its  own  rights  and 
obligations?  If  this  conception  were  approved  these 
preliminary  problems  of  identification  would  be  elim- 
inated and  we  could  approach  the  succeeding  prob- 
lems, such  as  the  liability  of  shareholders,  in  the 
light  of  the  real  intent  of  the  parties,  and  arrive  at 
a  satisfactory  solution. 

The  dictum  of  Judge  Loring  in  Williams  v.  Milton 
that  the  organization  before  the  court  in  Williams  v. 
Johnson  2°  was  a  trust  and  not  a  partnership,  though  the 
court  in  that  decision  said  that  it  was  a  partnership, 
makes  it  desirable  to  examine  in  some  detail  the  terms 
of  the  deed  of  trust  involved  in  Williams  v.  Johnson. 
The  original  papers  on  file  in  that  case  show  that  al- 
though the  deed  of  trust  contemplated  meetings  of  the 
shareholders,  the  provisions  for  that  purpose  were  un- 
usually meagre  and  apparently  the  shareholders  pos- 
sessed no  control  over  the  trustees.  The  only  definite 
provision  for  meetings  was  contained  in  Section  22  of 
the  deed  of  trust  and  is  as  follows: 

"Meetings  of  the  shareholders  may  be  called  by  any 
one  of  the  trustees  and  shall  be  called  upon  the  written 
request    of    five    or    more    shareholders.      Additional 

20  208  Mass.  544,  95  N.  E.  90.    See  note  2  of  this  section. 
59 


§  14]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

powers  may  be  created  in  the  trustees  at  any  meeting 
of  the  shareholders  by  a  vote  or  resolution  of  the  hold- 
ers of  at  least  two- thirds  of  the  shares  then  outstanding; 
provided  that  notice  of  the  proposed  addition  to  such 
powers  shall  have  been  given  in  the  call  for  the  meeting 
and  that  the  same  is  not  inconsistent  with  the  acquired 
rights  of  third  parties." 

In  Section  23  it  was  provided:  ''At  all  meetings  of 
shareholders  each  share  shall  be  entitled  to  one  vote 
and  absent  shareholders  may  vote  by  proxy  authorized 
by  a  writing  dated  and  executed  within  six  months 
previous  to  the  meeting  at  which  it  is  used."  There 
were  in  other  sections  certain  provisions  for  notice  to 
shareholders  of  the  calling  of  meetings  and  other  acts 
of  the  trustees.  It  was  also  provided  that  the  division 
of  net  income  should  be  discretionary  with  the  trustees 
except  that  in  any  year  when  the  net  income  exceeded 
two  per  cent,  of  the  par  value  of  the  outstanding  shares 
the  trustees  should  divide  among  the  shareholders 
three-fourths  of  that  net  income.  In  describing  the 
powers  of  the  trustees  it  was  provided:  "The  trustees 
shall  have  the  absolute  control  over  and  disposal  of  all 
real  estate  and  other  property  held  by  them  at  any  tune 
under  this  trust."  The  powers  of  the  trustees  were  not 
as  broad  as  in  some  other  deeds  of  this  sort  but  in- 
cluded the  power  to  acquire  other  real  estate  in  the 
vicinity  and  ''securities  of  any  corporation,  associa- 
tion or  real  estate  trust  organized  for  the  purpose  of 
acquiring,  holding,  managing  or  improving  real  estate, 
or  for  the  purpose  of  conducting  a  lighting,  heating, 
power  or  other  business  directly  related  to  the  man- 
ag(;mc;nt  of  real  estate,  if  in  their  judgment  such  acqui- 
sition will  in  £\,ny  manner  tend  to  facilitate  the  laying 

GO 


Chap.  II]  PARTNERSHIPS  AND  TRUSTS  [§  14 

out,  development,  management  or  improvement  of  the 
real  estate  this  day  conveyed  to  them." 

These  stipulations  apparently  gave  the  shareholders 
no  control  whatever  over  the  trustees  and  although 
they  had  the  right  of  association  it  would  seem  that 
they  could  vote  only  to  increase  the  powers  of  the  trus- 
tees. It  is  this,  doubtless,  which  Judge  Loring  had  in 
mind  in  declaring  that  the  organization  was  a  trust 
and  not  a  partnership.  On  the  other  hand,  the  sec- 
tion relating  to  the  nature  of  the  shareholders'  interest 
seems  consistent  only  with  the  conception  of  a  partner's 
interest  in  the  partnership  property  and  not  with  that 
of  the  beneficiary  in  a  trust  estate. 

''§2.  The  shareholders  are  not  to  have  any  legal 
title  to  the  trust  property  itself  real  or  personal,  held 
from  time  to  time  by  the  trustees  and  in  especial,  they 
shall  have  no  right  to  call  for  any  partition;  they  shall 
have  no  equitable  estate  in  the  lands  and  appurtenances 
thereto  belonging  constituting  the  trust  property, 
but  their  interest  shall  consist  only  of  an  interest  in 
the  money  to  arise  from  the  sale  or  other  disposition 
thereof  by  the  trustees,  as  herein  provided,  and  of  the 
rights  herein  mentioned  previously  to  such  sale,  and 
the  shares  shall  be  personal  property  carrying  the 
rights,  as  herein  set  forth,  of  division  of  proceeds  and 
profits  and  the  other  rights  and  matters  concerning  the 
trust  property  and  shall  be  transmissible  and  transfer- 
able as  personal  estate." 

The  distinction  between  trust  and  partnership  has 
been  recognized  in  other  States.^^ 

21  An  English  investment  trust  formed  to  buy  United  States  mu- 
nicipal bonds.  Held:  "The  trust  was  not  a  corporation  or  joint  stock 
company  or  partnership,  but  a  trust  formed  by  deed  of  settlement  for 
the  purpose  of  securing  investments.     The  trustees  were  the  legal 

61 


> 


§  15]  ASSOCIATIONS  FOR   PROFIT  [Chap.  II 

§  15.  Declaration  of  Intention 

In  all  agreements  on  the  border  line  of  partnership, 
the  parties  endeavor  to  escape  liability  as  partners 
by  declaring  their  intention  not  to  be  partners.  It 
is  well  settled  in  the  law  of  partnership  that  such 
declaration  of  intention  is  not  conclusive.^  As 
Judge  Loring  said  of  such  a  declaration,  "It  is 
what  the  parties  did  in  making  the  trust  indenture 
that  is  decisive.  If  there  had  been  doubt  as  to 
what  they  did,  w^hat  they  intended  to  do  would 
have  been  a  matter  entitled  to  some  consideration 
in  determining  what  they  did."  ^ 

§  16.  Unincorporated  Companies  under  the  Bankruptcy  Act 

A  recent  case  in  the  United  States  District  Court  for 
the  District  of  Massachusetts  ^  deals  indirectly  with  the 
problem.  The  organization  in  question  was  unusual  in 
form.  Certificates  had  been  issued  by  the  trustee  of  a 
real  estate  trust  which  were  a  cross  between  bond  and 
stock  and  carried  most  attenuated  rights  of  association. 
The  issue  before  the  court  was  whether  the  "Asso- 
ciated Trust"  was  an  "unincorporated  company" 
within  the  meaning  of  the  United  States  Bankruptcy 
Law,  and  so  subject  to  involuntary  bankruptcy.    The 

owners  of  the  trust  property  and  the  business  of  the  trust  was  managed 
by  them  and  'the  committee'  created  by  the  deed  for  the  benefit  of 
the  certificate  holders,  who  were  strangers  to  each  other  and  who  en- 
tered into  no  contract  between  themselves  nor  with  any  trustee  on 
behalf  of  each  other  and  were  not  therefore  partners."  Johnson  v. 
Lewis,  G  Fed.  27  (C.  C.  —  Ark.). 

On  the  other  hand  a  real  estate  trust  formed  in  Massachusetts  to 
deal  in  land  in  Iowa  was  held  a  partnership  in  courts  of  the  latter. 
Mallory  v.  Ru.sscill,  71  la.  O:',,  (iG,  .32  N.  W.  102. 

>  Heecher  v.  IJu.sh,  4.'5  Mich.  ISS,  7  N.  W.  785. 

*  Williams  v.  Milton,  21.'")  Mass.  1.  12,  102  N.  E.  3.55. 

I  In  re  The  As.socialed  Trust,  222  Fed.  1012  (D.  C.  —  Mass.). 

02 


Chap.  II]  BANKRUPTCY  ACT  [§  16 

nature  of  this  organization  is  best  defined  in  the  lan- 
guage of  Judge  Morton: 

"The  character  of  the  respondent  is  to  be  gathered 
from  the  trust  deed.  Under  it,  the  trustee  declared 
that  he  would  take  and  hold  in  trust  money  paid  to  him 
by  other  persons  to  the  amount  of  One  Million  Dollars, 
for  which  he  would  issue  transferable  certificates  hav- 
ing a  face  value  of  One  Hundred  Dollars,  entitled  to 
interest,  and  to  participate  in  surplus  earnings,  and 
also  entitled  to  borrow  from  the  Trust  sixty  per  cent, 
of  the  face  value  of  the  certificate,  and  after  five  years 
to  receive  from  the  Trust  in  cash  the  face  value  of  the 
certificate  upon  the  surrender  thereof.  The  trustee  is 
given  very  broad  powers  as  to  the  management  of  the 
property  in  which  the  trust  funds  are  invested,  with 
the  right  to  determine  what  part  of  the  income  shall  be 
divided  and  what  shall  be  retained  as  surplus.  He  has 
no  power  to  bind  any  of  the  certificate-holders ;  and  they 
have  no  power  to  interfere  directly  in  the  management 
of  the  property,  and  no  title  to  it.  A  '  Board  of  Direc- 
tors' is  provided  for,  who  may  be  appointed  by  the 
trustee  and  are  removable  by  him;  their  duties  are 
merely  to  advise  the  trustee;  they  are  negligible  as  to 
the  question  here  raised.  Up  to  this  point  there  would 
seem  to  be  nothing  in  the  organization  differentiating 
it  under  the  Massachusetts  decisions  from  what  may 
be  called  an  ordinary  trust;  that  is,  the  beneficiaries, 
cestuis,  or  certificate-holders  (whichever  they  may  be 
called)  have  no  interest  in  the  trust  property  and  no 
right  to  joint  action  for  control  of  it.  They  are  in  sub- 
stance like  beneficiaries  in  a  trust  under  a  will.  There 
is  no  organization  having  a  distinct  entity  apart  from 
the  trustee. 

63 


§  16]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

"  But  the  declaration  of  trust  also  provides  that  if  the 
trustee  resigns,  the  certificate-holders  may,  at  a  meet- 
ing called  for  the  pm-pose,  elect  a  new  trustee  (Par.  16) ; 
that  vacancies  in  the  trusteeship  may  be  filled  by  elec- 
tion by  a  majority  vote  of  the  certificate-holders  at 
meetings  duly  called  (Par.  17) ;  that  at  such  meetings  a 
majority  of  the  outstanding  shares  shaU  constitute  a 
quorum,  and  that  each  share  shall  be  entitled  to  one 
vote  which  may  be  cast  bj'  proxA"  (Par.  29) ;  that  upon 
notice  in  the  manner  provided  special  meetings  of  the 
certificate-holders  may  be  called  b}^  the  trustee  and 
shall  be  called  on  T\Titten  appHcation  of  three  or  more 
certificate-holders  ha^Tiig  not  less  than  twenty  per  cent, 
of  the  outstanding  shares  (Pars.  28,  31,  32);  that  the 
certificate-holders  by  a  three-quarters  vote  of  the  out- 
standing shares  may  determine  the  trust  (Par.  33),  in- 
crease the  number  of  shares  and  amend  the  declara- 
tion of  trust  (Par.  36). 

"  It  thus  appears  (1)  that  the  respondent  has  a  capital 
contributed  by  the  certificate-holders.  (2)  That  future 
managers  are  to  be  chosen  by  the  certificate-holders. 
(3)  That  the  character,  scope  and  size  of  the  enterprise 
may  be  changed  by  the  certificate-holders,  and  that 
it  may  be  terminated  by  them.  (4)  That  these  rights 
and  powers  are  given  to  the  certificate-holders  in  the 
instrument  by  which  The  Associated  Trust  is  con- 
stituted. 

"  The  absolute  powers  of  termination  and  amendment 
give  the  certificate-holders,  as  it  seems  to  me,  the  ulti- 
mate control  of  the  business  of  the  trust  whenever 
they  choose  to  take  that  power  into  their  hands.  They 
have  not  yet  done  so,  but  the  character  of  the  organi- 
zation is  to  be  gauged  rather  by  the  powers  of  the 

(J4 


Chap.  II]  BANKRUPTCY  ACT  [§16 

certificate-holders,  than  by  the  extent  to  which  those 
powers  have  as  yet  been  exercised.  The  analogy  be- 
tween the  respondent  organization  and  a  corporation 
is  apparent.  The  certificate-holders  clearly  possess 
many  of  the  most  characteristic  powers  of  stockholders. 
If  the  expression  'unincorporated  company'  in  the 
Bankruptcy  Act  does  not  describe  such  an  organiza- 
tion as  the  respondent,  it  is  difficult  to  see  what  mean- 
ing can  be  given  to  those  words.  To  hold  the  re- 
spondent a  partnership  within  the  Bankruptcy  Act 
would  lead  to  results  never  contemplated  by  anybody, 
and  would  impose  upon  the  certificate-holders  obliga- 
tions which  neither  they  nor  the  creditors  of  the  Trust 
supposed  existed.  It  would  be  a  very  unjust  result. 
To  hold  that  the  respondent  is  not  an  organization 
and  is  nothing  more  than  a  strict  trust,  is  almost  as 
far  from  the  fact  as  to  hold  it  to  be  a  partnership. 
These  certificate-holders  voluntarily  entered  into  a 
business  organization,  in  which  they  invested  their 
money  under  a  contract  by  which  they  acquired  cer- 
tain individual  rights  against  the  trustee,  and  cer- 
tain other  rights  to  be  exercised  by  joint  action  of 
all  the  certificate-holders.  'Unincorporated  company' 
seems  to  me  exactly  to  describe  what  the  respondent 
is.  In  re  Seaboard  Fire  Underwriters,  137  F.  R. 
987. 

"I  therefore  am  obliged  to  hold  that  the  plea  and  the 
motions  to  dismiss  contained  in  the  answer  cannot  be 
sustained,  and  that  the  respondent  is  subject  to  adjudi- 
cation." 

Though  this  case  decides  merely  that  the  trust  was 
an  "unincorporated"  company  within  the  language  of 
a  Federal  statute,  a  conclusion  to  which  no  exception 

65 


§  17]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

can  be  taken,^  it  implies  that  the  law  should  recognize 
such  an  organization  as  a  distinct  entity  intermediate 
between  the  corporation  on  the  one  hand  and  the  part- 
nership and  the  trust  on  the  other.^  It  might  be  ar- 
gued, however,  that  the  reasoning  of  the  court  with 
reference  to  the  effect  of  the  provisions  for  election  of 
trustees  and  termination  of  the  trust  would  bring  this 
trust  within  Judge  Loring's  definition  of  partnership 
because  the  cornet  found  both  elements  of  association 
and  control.  The  answer  of  the  court  that  this  would 
lead  to  results  never  contemplated  by  anybody  is 
equally  true  of  many  partnership  cases  where  the  par- 
ties involved  did  not  appreciate  the  legal  consequences 
of  their  acts.  It  should  also  be  noted  that  in  this  case 
counsel  on  both  sides  expressly  disclaimed  any  con- 
tention that  the  Associated  Trust  was  a  partnership. 
If  the  view  above  suggested  is  sound,  however,  the 
organization  in  question  was  merely  a  trust. 

§  17.  Association  for  Profit  Distinguished  from  Tenancies 
in  Common 

Another  possible  line  of  distinction  in  determining 
whether  or  not  shareholders  in  these  organizations 
have  incurred  the  liabilities  of  partners  is  that  between 
partners  and  tenants  in  common.  This  is  one  of  the 
most  familiar  tests  of  partnership  and  in  close  cases 
one  of  the  most  difficult  to  apply.  It  is  plain  that  mere 
joint  ownership  of  property  does  not  make  the  co-owners 
partners.^  It  is  an  incident  of  ownership  that  the  owner 
may  derive  income  from  his  investment.    So  the  mere 

2  See  Re  Seaboard  Fire  Underwriters,  137  Fed.  987  (D.  C.  —  N.  Y.). 

'  S(!e  §  12,  note  5. 

»  Fall  River  Whaling  Co.  v.  Borden,  10  Cush.  458  (Mass.). 

66 


Chap.  II]  TENANCIES   IN  COMMON  [§17 

fact  that  tenants  in  common  jointly  gain  by  their  in- 
vestment either  by  increment  to  its  capital  value  or  by 
way  of  interest  or  rent  does  not  make  them  partners. 
Partnerships  came  into  the  common  law  as  organiza- 
tions engaged  in  buying  and  selling  personal  property. 
The  rights  and  limitations  of  joint  tenancy  of  real 
estate  had  become  fixed  long  before.  Hence  there  is 
still  the  element  of  trade  implied  in  partnership,  al- 
though it  has  long  since  ceased  to  be  limited  to  the 
business  of  buying  and  selling  merchandise.  It  may 
apply  equally  well  to  trading  in  real  estate,^  and  Lord 
Cockburn  said  that  joint  owners  of  a  horse  might  be- 
come partners  in  the  use  of  the  horse  if  they  made  a  busi- 
ness of  racing  him  for  money  prizes.^  Just  where  the 
line  is  to  be  drawn  in  complicated  states  of  fact  be- 
tween deriving  an  income  from  property  owned  jointly 
and  making  a  profit  out  of  the  use  of  that  property  in 
business  it  is  as  yet  difficult  to  state,  but  that  there  is  a 
valid  distinction  between  the  two  kinds  of  relation  to 
property  we  all  recognize  and  it  is  established  law.^ 

2  Fall  River  Whaling  Co.  v.  Borden,  10  Cush.  458  (Mass.). 

3  French  v.  Styring,  2  C.  B.  N.  S.  357;  see  also  Goell.v.  Morse,  126 
Mass.  480. 

*  Early  Hudson  River  steamboat  company  held  tenants  in  common 
and  not  partners.  Livingston  v.  Lynch,  4  Johns.  Ch.  573,  592.  Sub- 
scribers to  an  unincorporated  telegraph  company  were  held  tenants  in 
common  and  not  partners.  Such  a  decision  would  hardly  be  expected 
to-day  if  it  were  a  commercial  telegraph  company.  Irvine  v.  Forbes, 
11  Barb.  587,  589.  But  see  modern  cases  on  "farmers"  telephone 
lines."     §  54,  note  8. 

Proprietors  of  a  grist  mill  were  held  tenants  in  common.  Buck  v. 
Spofford,  31  Me.  34. 

A  gi-oup  contributed  in  equal  shares  to  buy  a  vessel  and  cargo  and 
send  both  to  California  to  be  sold  by  an  agent.  Defendants  were  sued 
on  notes  given  by  the  agent  in  payment  for  cargo.  Notes  in  name  of 
agent.  Held:  Liable  whether  partners  or  not  on  principles  of  agency. 
Dictum  that  tenants  in  common  and  not  partners.  French  v.  Price, 
24  Pick.  13,  20. 

Numerous  heirs  and  devisees  of  three  original  proprietors  of  a  ferry 
continued  to  operate  it.     Petition  for  partition  dismissed  and  cause 

67 


§  17]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

The  law  of  mining  partnerships,  as  the  exception  has 
been  developed  in  the  mining  states,  affords  an  example 
on  the  border  line  between  tenancies  in  common  and 
partnerships.  Co-owners  of  a  mining  claim  are  ten- 
ants in  common  just  like  tenants  in  common  of  any- 
other  real  estate.  When  they  begin  to  work  it  and  enter 
into  the  business  of  producing  ore  and  selling  it  for 
profit  they,  of  course,  become  partners.  As  the  law 
has  been  stated,  and  is  now  set  forth  in  the  codes,  the 
operation  of  the  mine  constitutes  a  ''mining  part- 
nership" between  the  owners  who  join  in  working 
it.^    Those  who  do  not  join  retain  the  relation  of  tenants 

remanded  for  an  accounting  and  dissolution  of  partnership.  Bogardus 
V.  Reed,  145  N.  Y.  S.  597,  160  App.  Div.  294. 

*  Where  an  agent  locates  a  placer  claim  and  later  agent  and  prin- 
cipal without  any  contract  engage  in  working  it  they  become  mining 
partners  in  the  work  of  mining  but  not  in  the  ownership  of  the  ground. 
M'Mahon  v.  Meehan,  2  Alaska  278,  286. 

On  a  bill  for  specific  performance  of  a  contract  held  it  did  not  create 
a  mining  partnership  because  there  was  no  allegation  that  the  defend- 
ant actually  engaged  in  working  the  mines.  Marks  v.  Gates,  2  Alaska 
519,  523. 

The  holder  of  a  claim  to  coal-bearing  land  agreed  with  two  others  to 
prospect  at  their  own  expense  for  a  ledge,  after  which  all  three  were  to 
jointly  work  the  ledge.  Held:  This  did  not  create  a  relation  of  land- 
lord and  tenant  but  tenants  in  common  or  partners  in  mining  and 
therefore  the  plaintiff  had  mistaken  his  remedy.  Henderson  v.  Allen, 
23Cal.  519,  521. 

Tenants  in  common  of  a  mine  who  join  in  working  it  without  formal 
agreement  are  a  mining  partnership  which  is  not  founded  on  the  delectus 
personae,  but  shares  are  a.s.signable  and  assignment  of  shares  or  death 
of  shareholder  do  not  produce  dissolution.  Hence  members  have 
limited  authority  to  bind  the  others  and  it  would  not  include  authority 
to  em})loy  an  attorney  to  prosecute  claims.  Charles  v.  Eshleman,  5 
Col.  107,"  111. 

An  agi'eement  l)y  one  to  furnish  services  and  others  money  for  work- 
ing a  mine  constitutes  a  mining  j)artnership.  The  members  are  liable 
for  labor  enij)loyed  in  the  work.  L>^nan  v.  Schwartz,  13  Col.  App. 
318,  321,  57  Pac.  735. 

"In  order  to  create  a  mining  partnership  it  seems  to  be  necessary 
that  there  be  an  agreenujnt  to  work  the  mine  for  the  joint  profit  of  the 
parties.  Otlierwisc;  the  owners  of  the  j^roperty  acquired  in  .such  man- 
ner JUS  i.s  lien-  chargcHJ  are  ((^nants  in  common."  "Indeed  it  seems  to 
be  held  that  the  mere  use  of  ijroperly  so  obtained  for  partnership  pur- 

08 


Chap.  II]  TENANCIES  IN   COMMON  [§  17 

in  common.^  The  partnership  may  include  others  than 
the  tenants  in  common  of  the  mine.^  A  smelting  firm 
has  been  held  a  ''mining  partnership."  ^  In  apply- 
ing the  doctrine  to  oil  drilling,^  it  has  been  held  that 
the  co-tenants  became  partners  even  where  they 
divided  the  product  in  specie. ^°    An  attempt  has  been 

poses  does  not  convert  it  into  partnership  assets  in  the  absence  of  an 
agreement  to  make  it  partnership  property."  Doyle  v.  Burns,  123  la. 
488,  495,  99  N.  W.  195. 

Cessation  of  work  amounts  ipso  facto  to  a  dissolution  of  a  mining 
partnership  formed  under  the  statute  merely  by  operation,  but  a  tem- 
porary discontinuance  will  not.  Nielson  v.  Gross,  17  Cal.  App.  74,  118 
Pac.  725. 

A  mere  prospecting  or  "grub  stake"  contract  is  not  a  mining  part- 
nership and  the  contractors  do  not  become  partners  until  they  discover 
and  actually  work  a  mine.  Hence  the  defendants  were  not  hable  for 
supphes  furnished  the  prospector.  Hartney  v.  GosKng,  10  Wyo.  346, 
358,  68  Pac.  1118. 

A  miner's  agreement  referred  to  "prospecting  partners"  of  the  dis- 
coverers of  a  claim.  Held  that  those  who  furnished  money  and  pro- 
visions to  the  prospectors  to  enable  them  to  search  for  gold  were  meant 
though  they  might  not  technically  be  partners.  Boucher  v.  Mulver- 
hill,  1  Mont.  306,  310. 

6  Mader  v.  Norman,  13  Idaho  585,  590,  92  Pac.  572;  Anaconda  Co. 
V.  Butte  Co.,  17  Mont.  519,  43  Pac.  924;  see  Fu-st  Bank  v.  G.  B.  V.  Co., 
89  Fed.  449  (D.  C.  —  Idaho).  So  of  operation  by  one  tenant  in 
common  under  a  deed  of  trust.  Peterson  v.  Beggs,  148  Pac.  541 
(Cal.). 

'  A  partnership  was  held  to  exist  within  the  rule  of  Meehan  v. 
Valentine,  145  U.  S.  611,  36  L.  ed.  835,  12  S.  Ct.  972,  to  operate  a 
mine.  It  was  said  to  be  clearly  a  mining  partnership  under  the  special 
rule.  It  was  not  necessary  that  all  should  have  had  an  interest  in  the 
mining  lease  if  interested  in  the  operating.  The  special  rules  are  set 
forth  on  p.  413.  Hence  defendants  were  liable  for  labor  claims.  Bent- 
ley  V.  Brossard,  33  Utah  396,  411,  94  Pac.  736. 

*  An  association  to  operate  a  smelter  and  mines  is  a  mining  partner- 
ship. Review  of  rules  as  to  such.  Superintendent  can  bind  members 
on  a  contract  for  charcoal  for  use  in  the  smelter.  Higgins  v.  Armstrong, 
9  Col.  38,  46,  10  Pac.  232. 

^  Shareholders  in  a  corporation  who  bought  its  oil  leases  on  a  wind- 
ing up  and  operated  them  and  divided  the  net  profits  were  held  a  min- 
ing partnership.  The  rule  that  mere  operation  creates  it  was  stated. 
Kirchner  v.  Smith,  61  W.  Va.  434,  444,  58  S.  E.  614. 

"  Oil  miners  who  divided  the  oil  in  specie  by  receiving  separate  cer- 
tificates for  the  share  of  each  from  the  pipe  line  company  were  held 
mining  partners  under  the  theory  that  mere  operation  of  a  mine  by  co- 
owners  made  them  such,  citing  the  cases  under  Western  codes  without 
mentioning  the  latter.    The  general  rules  distinguishing  mining  part- 

69 


§  17]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

made  to  extend  the  doctrine  of  mining  partnerships  to 
proprietors  of  irrigation  ditches,  but  the  courts  seem 
uncertain  of  their  ground. ^^ 

The  apphcation  of  the  distinction  between  tenancies 
in  common  and  partnerships  to  organizations  formed 
under  deeds  of  trust  will  arise  in  two  different  kinds  of 
enterprise.  One  of  the  most  common  of  these  associa- 
tions is  that  formed  for  the  purpose  of  constructing  and 
owning  large  office  buildings  or  hotels  in  cities.  It  is 
hard  to  see  why  a  distinction  should  be  made  between 
two  men  who  jointly  own  an  office  building  and  derive 
a  profit  from  their  rentals  less  their  expenses  and  two 
hundred  men  who  hold  transferable  shares  in  a  trust 
which  owns  a  similar  building.  Yet  as  great  a  lawyer 
as  Jessel,  M.R.,  seems  to  have  thought  such  a  distinc- 
tion valid. 

"There  are  many  things  which  in  common  colloquial 
Enghsh  would  not  be  called  a  business  even  when  car- 
ried on  by  a  single  person  which  would  be  so  called 
when  carried  on  by  a  number  of  persons.  This  is  a  dis- 
tinction not  to  be  forgotten  even  if  we  were  trying  the 
question  by  ordinary  use  of  the  English  language.  For 
instance,  a  man  who  is  the  owner  of  offices,  that  is,  of  a 
house  divided  into  several  floors  and  used  for  commer- 

nerships  are  laid  down.  Childers  v.  Neely,  47  W.  Va.  70,  72,  34  S.  E. 
828. 

Tonants  in  common  of  an  oil  lease  dividing  the  oil  between  them 
were  held  partncsrs  and  it  was  said  that  the  rules  of  mining  partnership 
applied  and  that  the  shares  were  freely  transferable.  Ervin  v.  Master- 
man,  10  Ohio  Cir.  Ct.  G2,  70. 

"  Tenanls  in  common  of  a  water  ditch  selling  water  may  be  re- 
garded a.s  partners.  One  tenant  allowed  to  recover  from  another  his 
Hhar(!  in  profits  received  from  sales  of  water.  Abel  v.  Love,  17  Cal. 
233,  237. 

Owncns  of  shares  in  irrigation  ditch  held  tenants  in  common  and 
not  j)artnerH  because  shares  freely  salable.  Uradh^y  v.  Harkness,  26 
Cal.  09,  77.  A  later  case  says  they  an;  like  mining  partnerships.  Mc- 
Conncll  ;;.  Denver,  35  Cal.  305. 

70 


Chap.  II]  TENANCIES  IN  COMMON  [§  17 

cial  purposes,  would  not  be  said  to  carry  on  a  business 
because  he  let  the  offices  as  such ;  but  suppose  a  com- 
pany was  formed  for  the  purpose  of  buying  a  build- 
ing or  leasing  a  house  to  be  divided  into  offices  and  to  be 
let  out,  should  we  not  say  if  that  was  the  object  of  the 
company  that  the  company  was  carrying  on  business 
for  the  purpose  of  letting  offices  or  was  an  office  letting 
company,  trying  it  by  the  use  of  ordinary  colloquial 
language.  ..." 

"When  you  come  to  an  association  or  company 
formed  for  a  purpose,  you  say  at  once  that  it  is  a 
business  because  there  you  have  that  from  which 
you  would  infer  continuity."  ^^  It  must  of  course  be 
remembered  that  the  Master  of  the  Rolls  was  not 
deciding  the  direct  question  of  partnership  or  not,  but 
whether  there  were  persons  associated  for  the  pur- 
pose of  carrying  on  a  business  within  the  meaning  of 
a  certain  statute. 

A  joint  stock  company  or  association  was  formed 
to  buy  a  tract  of  land,  sell  lots  until  all  costs  and  ex- 
penses were  paid  and  then  divide  the  balance  of  the 
land  among  the  shareholders.  It  was  held  by  the  Su- 
preme Court  of  the  United  States  to  be  a  partnership.^^ 
It  has  been  held  in  Massachusetts,  that  a  real  estate 
trust  formed  for  the  purpose  of  erecting  a  hotel  and 
leasing  it  was  taxable  in  Boston  as  a  partnership.    The 

12  Smith  V.  Anderson,  L.  R.  15  Ch.  D.  247,  259,  273.  (The  de- 
cision of  the  Master  of  the  Rolls  was  reversed  on  appeah  See  §  18, 
note  1,  especially  the  opinion  of  Cotton,  L.J.) 

Owning  and  renting  an  office  building  was  held  "doing  business" 
within  the  meaning  of  the  Federal  Corporation  Tax  of  1909.  Zonne  v. 
Minneapohs  Syndicate,  220  U.  S.  187,  55  L.  ed.  428,  31  S.  Ct.  361. 

13  Clagett  V.  Kilbourne,  66  U.  S.  346,  349,  17  L.  ed.  494. 

A  similar  organization  with  transferable  shares  was  assumed  to  be 
a  partnership  in  Merchants  National  Bank  v.  Wehrmann,  202  U.  S. 
295,  300,  50  L.  ed.  1036,  26  S.  Ct.  613. 

71 


§  17]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

court  said:  ''There  is  no  doubt  that  they  are  joint 
owners  of  property  for  whose  benefit  the  business  is 
being  carried  on,  in  which  profits  or  loss  will  affect  them 
all  proportionally  through  the  increase  or  diminution 
of  the  value  of  their  respective  interests  in  the  trust. 
In  the  leading  and  substantial  features  that  distinguish 
an  ordinary  partnership  this  association  is  within  the 
spirit  and  meaning  of  the  law  of  partnership.  The  limi- 
tations upon  the  power  and  liability  of  individual  mem- 
bers and  the  attempt  to  avail  themselves  of  many  of  the 
privileges  of  stockholders  in  corporations  relate  more 
to  details  and  to  the  machinery  of  management  than 
to  the  substantive  purpose  of  the  enterprise."  ^*  This 
case  Judge  Loring  approved  in  the  opinion  above 
quoted,  but  on  the  ground  that  the  original  papers 
showed  that  the  shareholders  had  the  right  to  instruct 
and  remove  their  trustees,  amend  the  declaration  of 
trust  or  direct  the  trustees  to  sell  the  property  and  dis- 
tribute the  proceeds.  He  also  notes  that  the  declared 
purpose  of  the  trust  was  "the  purchase,  development 
and  disposition  of"  certain  real  estate. ^^  In  drawing 
these  declarations  of  trust,  lawyers  have  been  prone  to 
expand  and  multiply  the  declared  purposes  of  the  trust 
and  the  powers  of  the  trustees  in  imitation  of  the  com- 
mon practice  in  drawing  charters  of  corporations.  In 
many  instances  it  will  be  found,  therefore,  that  the 

"  Williams  v.  Boston,  208  Mass.  497,  500,  94  N.  E.  808. 

Bill  to  redeem  from  sale  under  attachment  certain  lots  sold  by  a 
real  estate  trust.  It  was  contended  that  the  real  estate  trust  was  in- 
valid. It  was  an  association  with  power  to  direct  and  control.  Held: 
The  trust  was  not  executed  by  the  statute  of  uses.  The  beneficiary 
was  a  partnershif)  (p.  010)  of  determinable  members  capable  of  taking 
and  the  trust ecvs  were  active  (p.  Oil).  The  power  of  shareholders  to 
remove  trust(!(!H  does  not  affect  (heir  k^gal  title;  (ill  exercised  (p.  613). 
Not  a  perjjetuit.y  because  lots  inmiediatcly  salable.  No  restraint  on 
alienation  fp.  014).     liart  v.  Seymour,  147  111.  598,  35  N.  E.  246. 

">  Wilhams  v.  Milton,  215  Mass.  1,  7,  102  N.  E.  355. 

72 


Chap.  II]  HOLDING   COMPANIES  [§  18 

scope  of  the  enterprise  as  set  forth  in  the  instru- 
ment under  which  it  is  organized  includes  that  which 
is  clearly  appropriate  to  a  partnership  even  though  the 
specific  purpose  the  shareholders  contemplate  and  in 
fact  undertake  may  be  more  properly  described  as  a 
mere  investment. 

§  18.  Holding  Companies 

Such  organizations  as  are  above  described  are  now 
frequently  formed  to  serve  as  holding  companies  in  con- 
solidating numerous  public  service  corporations,  and  in 
view  of  the  present  trend  of  legislation  this  use  of  unin- 
corporated associations  seems  likely  to  be  extended. 
The  specific  object  of  such  organizations  is  to  acquire 
and  hold  shares  of  stock  in  certain  classes  of  corpora- 
tions and  after  paying  the  slight  expenses  of  the  asso- 
ciation to  redistribute  in  dividends  to  its  shareholders 
the  dividends  and  interest  received  from  the  shares  of 
stock  and  bonds  it  owns.  This  in  itself  seems  merely 
an  investment  rather  than  a  business  and  was  so  held 
in  Smith  v.  Anderson.^  Lord  Justice  Brett  said:  "I 
confess  I  have  some  difficulty  in  seeing  how  there  could 
be  an  association  for  the  purpose  of  carrying  on  a  busi- 
ness which  could  be  neither  a  company  nor  a  partner- 
ship, but  I  should  hesitate  to  say  that,  by  the  ingen- 
uity of  men  of  business,  there  might  not  some  day  be 
formed  a  relation  among  twenty  persons  which,  with- 
out being  strictly  either  a  company  or  a  partnership, 
might  yet  be  an  association. 

"Where  it  is  a  joint  stock  company,  or  a  corpora- 
tion, or  quasi  corporation,  and  the  individuals  are  mere 
shareholders,  then  the  gain  which  is  acquired  by  the 

1  L.  R.  15  Ch.  D.  247,  274. 
73 


§  18]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

business  is  a  gain  by  the  company,  and  not  a  gain  by  the 
individual  shareholders.  But  where  it  is  an  ordinary 
partnership,  or  where  it  is  an  association  which,  not 
being  a  joint  stock  company  or  corporation,  is  more 
like  to  a  partnership,  there  the  gain  will  not  be  by  the 
whole  body  as  distinct  from  the  individuals,  but  by 
the  individual  partners. 

''Let  us  now  consider  whether  in  the  present  case 
there  were  any  persons  associated  for  the  purpose  of 
carrying  on  any  business  such  as  is  described  in  this 
clause.  If  there  were  such  persons,  they  must  have 
been  either  the  trustees  or  the  certificate-holders.  In 
my  opinion  neither  the  one  nor  the  other  were  asso- 
ciated together  for  the  piu-pose  of  carrying  on  such  a 
business  as  is  described  in  the  act.  I  will  take  first  the 
trustees  themselves.  The  trustees  were  not,  as  I  con- 
strue the  deed,  to  enter  upon  a  series  of  acts  which,  if 
successful,  would  obtain  a  gain.  They  were  joined  to- 
gether for  the  purpose  of  once  for  all  investing  certain 
money  which  was  delivered  into  their  hands,  and  not  for 
the  purpose  of  obtaining  gain  from  a  repetition  of  in- 
vestments. In  other  words,  they  were  not  associated 
together  for  the  purpose  of  speculating  in  shares.  That 
was  not  their  business.  There  was  no  reason  why,  when 
they  had  once  made  an  investment,  it  should,  under 
ordinary  circumstances,  ever  be  changed.  Therefore 
it  seems  to  me  that  the  primary  and  substantial  object 
of  their  associating  together  was  not  for  the  purpose  of 
carrying  on  a  business  which,  if  successful,  would  result 
in  the  acquisition  of  gain. 

"But  supposing  that  this  was  such  a  business  as  is 
mentioned  in  the  act,  were  the  certificate-holders  the 
persons  who  were  to  carry  it  on?    It  seems  to  me  that 

74 


Chap.  II]  HOLDING  COMPANIES  [§  18 

they  certainly  were  not.  I  take  it  that  the  persons 
called  trustees  in  the  deed  are  clearly  trustees  as  dis- 
tinguished from  agents  and  from  directors.  The  dis- 
tinction has  been  pointed  out  by  my  Lord,  and  I  en- 
tirely agree  with  it.  If,  indeed,  although  they  were 
called  trustees,  the  duties  which  they  had  to  perform 
were  really  those  of  directors,  then,  although  they  were 
called  trustees,  the  legal  effect  of  the  deed  would  be  that 
they  would  be  directors,  and  if  they  are  directors  they 
are  agents ;  but  here  it  seems  to  me  clear  that  according 
to  the  true  construction  of  the  deed  they  were  not  direc- 
tors or  agents,  but  trustees.  If  that  be  so,  the  certifi- 
cate-holders, even  if  they  were  associated  at  all,  were 
not  associated  for  carrying  on  the  business.  It  was  not 
their  business.  They  could  not  have  been  made  liable 
for  any  contract  made  by  the  trustees.  It  was  of  course 
urged  that  they  would  be  liable  as  undisclosed  prin- 
cipals. But  that  assumes  that  the  persons  who  made 
the  contracts  upon  which  they  are  to  be  liable  are  their 
agents  authorized  to  bind  them  by  their  contracts, 
which  is  obviously  not  true.  Therefore,  even  if  there 
be  here  a  business  within  the  meaning  of  the  section, 
yet  it  is  not  carried  on  by  the  certificate-holders,  who 
are  of  a  larger  number  than  twenty,  but  by  the  trus- 
tees, who  are  not  of  the  number  of  twenty  or  more; 
and  therefore  in  either  view  the  case  is  not  within  the 
statute." 

Lord  Justice  Cotton  said:  ''If  it  appeared  that  the 
real  object  of  the  deed  was  that  the  trustees  should 
speculate  in  investments,  even  though  confined  to  this 
particular  class,  the  case  would  have  stood  in  a  very 
different  position.  In  my  opinion  there  is  nothing  of 
that  sort.    This  is  not  a  provision  that  they  shall  make 

75 


§  19]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

a  profit  by  selling  and  buying  again  securities  of  this 
class,  whenever,  in  their  opinion,  the  turn  of  the  market 
makes  it  advisable  so  to  do.  The  deed  is  in  substance 
a  trust  deed,  providing  how  they  are  to  hold  as  trustees 
specified  securities  of  a  large  amount  with  provisions 
enabling  them  in  certain  events  to  sell  some  of  the  se- 
curities, and  enabling  them  when  that  is  done,  but  only 
under  special  circumstances,  to  reinvest,  not  to  specu- 
late. In  my  opinion  that  is  not  a  deed  providing  for 
carrying  on  a  business  within  the  meaning  of  the  act; 
it  is  a  deed  providing  for  the  holding  of  trust  property 
with  such  provisions  only  as  are  necessary  to  enable 
that  to  be  conveniently  done.  I  am  of  opinion,  there- 
fore, that  there  is  no  carrying  on  business  within  the 
meaning  of  the  act." 

The  power  to  sell  as  well  as  to  buy  these  securities 
is  ordinarily  so  essential  to  the  effective  operation  of 
one  of  these  holding  companies  that  in  most  instances 
it  will  be  found  that  the  declaration  of  trust  contains  a 
trading  element.^  If  the  organization  is  a  partnership, 
any  increase  in  the  value  of  the  securities  comprised 
in  the  trust  fund  is  a  profit  to  be  divided  among  those 
entitled  to  profits;  if  a  trust,  it  is  an  accretion  to  prin- 
cipal and  belongs  to  those  who  own  the  corpus  of  the 
trust  fund.^ 

§  19.  Application  of  Law  of  Partnership  to  Associations 
for  Profit 

Not  only  is  there  doubt  as  to  the  exact  definition  of 
those  associations  operating  under  deeds  of  trust  that 
are  partnerships,  but  there  are  many  questions  still  to 

2  Sc(!  §  34,  noto  1. 

»  WilliiimH  V.  Mill  on,  21.5  Mtuss.  1,  11,  102  N.  E.  355. 

70 


Chap.  II]  MEMBERSHIP  [§20 

be  settled  regarding  the  effect  of  the  provisions  by  which 
these  documents  purport  to  modify  the  usual  rules  of 
partnership. 

In  the  absence  of  any  such  stipulation  in  the  articles 
of  organization,  constitution  and  by-laws  or  deed  of 
trust,  whichever  may  have  been  made  the  mode  of 
organization  adopted,  it  is  generally  held,  when  once 
the  court  has  determined  that  the  particular  associ- 
ation in  question  is  a  partnership,  that  the  ordinary 
rules  of  the  law  of  partnership  apply.  When,  how- 
ever, one  modification  is  made,  such,  for  example,  as 
the  usual  provision  for  transferable  shares,  certain 
other  modifications  of  the  law  of  ordinary  partnerships 
are  generally  implied. 

§  20.  Membership  in  Informal  Association  for  Profit 

One  who  signs  the  constitution  of  an  informal  asso- 
ciation for  profit  becomes  a  member  from  the  date  of 
signature.^  New  members  were  added  to  a  joint  stock 
association  formed  to  publish  a  newspaper  by  the 
trustees  signing  an  agreement  to  hold  in  trust  for  them 
as  well  as  for  the  others.^  In  general,  membership  in 
an  association  is  a  question  of  fact  for  the  jury.^    A  wife 

1  Though  his  name  was  not  voted  on  till  later.  Beaman  v.  Whitney, 
20  Me.  413,  420.  But  signing  a  book  and  paying  a  doUar  for  member- 
ship in  a  cooperative  store  did  not  make  defendants  partners  where 
there  were  several  blank  pages  between  the  constitution  and  list  of 
signatures  without  evidence  of  intent  to  subscribe  to  articles  of  partner- 
ship.    Moore  v.  May,  117  Wis.  192,  94  N.  W.  45. 

Patrons  of  a  cheese  factory  operated  by  a  voluntary  association  do 
not  necessarily  become  members  of  the  association  and  therefore 
partners.    CooUdge  v.  Taylor,  85  Vt.  39,  80  Atl.  1038,  1045. 

2  Holt  V.  Blake,  47  Me.  62. 

^  Subscribers  to  shares  in  an  express  company  who  had  paid  assess- 
ments were  held  partners  and  so  liable  for  its  debts.  Frost  v.  Walker, 
60  Me.  468,  470;  contra,  it  has  been  said  that  subscribing  is  merely  a 
declaration  of  intention  to  become  a  partner.     Appeal  of  Hedge,  63 

77 


§  21]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

of  a  shareholder,  who  herself  held  stock,  was  held  not 
liable  for  debts  of  the  association  because  a  wife  cannot 
be  a  partner  with  her  husband.* 

§  21.  Property  Rights  in  Associations  for  Profit 

The  fact  that  the  shareholder  in  associations  organ- 
ized under  deeds  of  trust  is  a  cestui  que  trust  as  well  as  a 
member  of  an  association  has  caused  doubt  as  to  the 
nature  of  the  shareholder's  interest  in  the  assets  of  the 
association.  The  uncertainty  of  the  courts  as  to  the 
line  of  distinction  between  pure  trust  and  partnership 
has  added  to  the  confusion.  The  ordinary  rule  of  part- 
nership is  that  a  partner  individually  owns  no  part  in 
the  legal  or  equitable  title  to  the  personal  property  of 
the  firm  but  that  the  firm  as  an  entity  holds  that  title. 
The  nature  of  the  partner's  interest  is  a  chose  in  action, 
a  right  to  an  accounting  and  to  receive  his  share  in  the 
net  assets  after  payment  of  debts. ^  This  rule  has  been 
applied  in  defining  the  nature  of  the  interest  of  a 
shareholder  in  an  association. 

A  joint  stock  company  or  association  was  formed  to 
buy  a  tract  of  land,  sell  parts  until  all  cost  and  expenses 
were  paid,  and  then  divide  among  the  stockholders. 
Title  was  taken  in  name  of  trustees.  A  separate  cred- 
itor of  a  shareholder  got  judgment  and  levied  on  the 
land,  claiming  a  lien  on  his  share.     It  was  held  that  it 

Pa.  St.  273,  277;  see  also  Galveston  City  Co.  v.  Scott,  42  Tex.  535, 
553. 

Shar('hol«J(>rs  of  a  joint  stock  company  are  liable  as  partners.  If  the 
company  has  engaged  in  the  business  for  wliich  it  was  formed,  each 
Bubscriber  for  shares  with  the  intent  to  share  profits  and  each  con- 
tributor to  the  funds  is  liable  as  a  partner.  So  is  one  who  takes  part 
in  meetings  or  acts  as  manager.  Hunnewell  v.  Willow  Springs  Co.,  53 
Mo.  Ai)p.  245,  248. 

*  Norwood  ('.  Francis,  25  App.  D.  C.  463,  476. 

»  Pratt  V.  McCuinness,  173  Mass.  170,  172. 

78 


Chap.  II]  PROPERTY  RIGHTS  [§  21 

was  a  partnership  and  that  a  purchaser  at  an  execution 
sale  got  the  same  interest  as  the  debtor  had,  namely,  a 
share  in  the  net  assets  after  an  accounting,  and  that 
the  remedy  was  to  go  into  equity  for  an  account. ^ 

The  legal  title  to  partnership  real  estate  is  never  in 
the  firm  as  an  entity  but  may  be  vested  in  the  individ- 
ual partners  who  hold  in  trust  for  the  firm  or  in  some 
express  trustee  for  the  firm.  Unless  by  the  form  of  con- 
conveyance  a  partner  holds  the  legal  title  either  alone 
or  as  tenant  in  common  the  English  rule  is  that  his  in- 
terest before  dissolution  in  the  real  estate  held  in  trust 
for  the  firm  is  the  same  as  his  interest  in  the  personal 
property.^  In  most  States  in  this  country,  for  purposes 
of  descent,  it  has  been  treated  as  realty  subject  to  cer- 
tain exceptions  for  the  benefit  of  creditors.^  A  con- 
trary result  was  reached,  however,  in  a  case  relating 
to  a  real  estate  trust  formed  in  Massachusetts  to  deal 
in  land  in  Iowa.  The  widow  of  a  shareholder  claimed 
dower  in  land  conveyed  by  the  trustee.  The  court 
said:  ''The  enterprise  was  a  partnership  the  object  of 
which  was  to  buy  and  sell  real  estate;  and  the  in- 
terest of  the  individual  members  of  the  partnership 
was  the  proceeds  of  the  sale  of  the  land.  The  written 
contract  expressly  provides  that  the  trustee  shall  be 
invested  with  the  legal  title  of  the  land  purchased 
and  the  same  shall  be  sold  and  conveyed  by  him  and 
a  distribution  of  receipts  from  the  land  sales  shall 
from  time  to  time  be  made  to  the  members  of  the 
association  in  proportion  to  their  respective  interests. 
It  was  not  contemplated  that  there  should  at  any  time 
be  any  partition  or  division  of  the  lands  among  the 

2  Clagett  V.  Kilbourne,  66  U.  S.  346,  349,  17  L.  ed.  494. 

*  Darby  v.  Darby,  3  Di-ew.  495. 

4  Shearer  v.  Shearer,  98  Mass.  107,  115. 

79 


§  21]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

members  of  the  partnership,  but  the  contract  plainly 
provides  that  the  lands  shall  be  sold  by  the  trustee  and 
the  proceeds  divided  among  the  several  partners.  Be- 
ing partnership  land,  it  must  be  treated  as  personal  as- 
sets, not  only  so  far  as  the  rights  of  creditors  of  the 
partnership  are  involved,  but,  so  far  as  necessary,  for 
the  purpose  of  carrying  out  the  provisions  of  the  part- 
nership contract.  It  is  plain  to  be  seen  that  if  the  claim 
of  plaintiff  be  well  founded,  a  husband  could  not  be- 
come a  member  of  a  partnership  of  this  character  with- 
out associating  his  wife  with  him  as  a  member  of  the 
firm.  It  is  not  claimed  that  the  contract  of  partner- 
ship is  void.  Contracts  of  partnership  for  buying  and 
selling  real  estate  as  a  business  are  as  valid  and  bind- 
ing upon  the  parties  ^s  any  other  legal  contracts. 
The  parties  to  this  contract  expressly  provided  that 
the  title  to  the  land  should  be  held  by  a  trustee  and  that 
he  should  sell  and  convey  a  clear  and  absolute  title.  The 
contract  itself  refutes  the  idea  that  persons  who  paid 
their  money  in  aid  of  the  enterprise  became  seised  of 
any  estate  in  the  land.  Their  relation  to  the  enterprise 
was  very  much  like  the  relation  of  stockholders  in  a 
corporation  to  the  property  of  the  corporation." 
Hence  the  widow's  claim  was  dismissed.^ 

5  MaUory  v.  RusseU,  71  la.  63,  66,  32  N.  W.  102.  To  the  same  effect, 
are  Butterfield  v.  Boardslcy,  28  Mich.  412  (proceeds  of  oil  lands); 
Hornor  v.  Meyers,  29  Ohio  Weekly  Law  Bulletin  403  (petition  for 
partition  of  land  refused);  Dillworth  v.  Ackley,  1  Walk.  180  (Pa.) 
(bank).  An  attachment  of  shares  in  a  real  estate  association  gave  no 
lien  on  the  real  estate.  Pittsburg  Wagon  Works  Estate,  204  Pa.  St. 
432,  ."54  Atl.  311. 

Joint  stock  company  to  deal  in  real  estate.  Land  is  personal  prop- 
erty b(!!()nging  to  the  company  collectively.  Shareholder  has  only  a 
contingfmt  interest  in  profits  and  his  attacihing  creditor  can  get  no 
more.     Kramer  v.  Artliurs,  7  Pa.  St.  105,  172. 

Proceeds  of  mining  lands  declarc'd  as  a  dividend  was  held  income 
as  between  life  tenant  and  remainderman.     Shareholder's  interest  in 

80 


Chap.  II]  PROPERTY  RIGHTS  [§21 

It  has  seldom  been  of  importance  to  determine  the 
exact  natm^e  of  the  interest  of  the  cestui  que  trust  in  the 

property  said  to  be  only  a  right  to  an  accounting.    Oliver's  Estate,  136 
Pa.  St.  43,  20  Atl.  527. 

"And  while  the  association  is  not  a  creature  of  our  statutes  govern- 
ing the  formation  and  powers  of  corporations,  but  is  organized  and 
exists  at  common  law,  there  is  no  gi'ound  for  any  distinction  in  the 
apphcation  of  the  principle  announced  in  our  decisions,  that  in  what- 
ever manner  described  or  apportioned  an  addition  to  capital  stock 
generally  is  treated  as  capital  belonging  to  the  remainderman  and  not 
to  the  life  tenant.  We  are  accordingly  of  opinion  that  there  having 
been  no  fimd  which  could  be  designated  either  as  profits,  undivided 
earnings  or  accumulated  surplus  sufficient  to  meet  the  disbursement 
necessary  to  discharge  the  arrearage,  the  issue  of  new  shares  must  be 
deemed  an  addition  to  the  outstanding  capital  of  the  association." 
Gardiner  v.  Gardiner,  212  Mass.  508,  99  N.  E.  171.  See  Bisbee  v.  Mac- 
Kay,  215  Mass.  21,  102  N.  E.  327. 

In  deciding  that  shares  in  real  estate  trusts,  all  the  property  of  which 
and  place  of  business  and  books  where  alone  certificates  could  be  trans- 
ferred were  within  Massachusetts  and  the  trustees  of  which  lived  there, 
are  subject  to  the  Massachusetts  inheritance  tax  when  the  deceased  owner 
was  a  resident  of  New  York.  Held :  "  It  is  not  necessary  to  analyze  with 
greater  nicety  the  precise  character  of  the  property  interest  of  a  share- 
holder under  each  of  the  trusts.  It  is  true  of  all  of  them  that  their 
rights  are  equitable  interests  in  tangible  property  within  this  Common- 
wealth. While  the  legal  title  is  in  the  trustees,  their  ownership  is  fidu- 
ciary and  the  certificate  holders  are  the  ultimate  proprietors  of  the 
property,  which  is  held  and  managed  for  their  ultimate  benefit  and  which 
must  be  divided  among  them  at  the  termination  of  the  trust.  Their 
rights  constitute  not  choses  in  action  but  a  substantial  property  i-ight. 
In  this  respect  the  case  is  indistinguishable  in  principle  from  share- 
holders in  a  domestic  corporation.  Greves  v.  Shaw,  173  Mass.  205,  53 
N.  E.  372.  The  fact  that  the  certificates  themselves  were  not  within 
the  Commonwealth  is  an  immaterial  circumstance."  Peabody  v. 
Treasurer,  215  Mass.  129,  102  N.  E.  435. 

When  a  pm'chaser  of  shares  in  an  association  pledges  them  to  secure 
his  pm'chase  note  and  lets  them  stand  on  the  books  of  the  association 
in  the  name  of  the  pledgee,  the  purchaser  is  the  equitable  owner  of  the 
shares.     Lmnell  v.  Leon,  206  Mass.  71,  91  N.  E.  895. 

Issue  as  to  validity  of  oil  mining  claim.  Whether  development 
work  done  by  a  gi-antee  of  part  of  tract  inured  to  benefit  of  that  re- 
tained. Held:  "A  location  made  by  an  association  of  persons  being 
but  a  single  location  and  not  eight  separate  locations  is  to  be  treated 
as  an  entirety  under  one  location  for  all  purposes  of  marking  bounda- 
ries, doing  assessment  work,  expenditure  for  patent,  and  discovery  of 
oil  and  that  but  a  single  discovery  is  aU  that  is  required  to  support  it." 
Hence  work  done  by  successor  inured  to  their  benefit.  Merced  Oil 
Co.  V.  Patterson,  162  Cal.  358,  122  Pac.  950. 

But  see  a  curious  case  where  a  joint  stock  company  was  formed  to 
lay  out  a  town  and  sell  lots.     Held:    A  purchaser  of  shares  from  an 

81 


§  21]  ASSOCLITIOXS   FOR   PROFIT  [Chap.  II 

trust  res.  The  better  opinion  would  seem  to  be  that  it 
is  a  chose  in  action,  a  right  enforceable  in  equity  by  the 
beneficiary  against  the  trustee.  Courts  have  frequently 
treated  it,  however,  as  an  equitable  estate  especially 
when  the  trust  res  is  real  estate.^  ^Modern  tax  laws  are 
responsible  for  many  cases,  the  decision  of  which  has 
seemed  to  require  consideration  of  abstruse  problems 
which  bear  Uttle  resemblance  to  the  constitutional 
and  statutory  questions  usuallj'  involved  in  taxation. 
There  have  been  several  of  importance  to  our  subject. 
A  certificate  for  shares  in  a  real  estate  trust  was 
pledged  in  New  Hampshire  where  the  pledgee  Uved. 
The  trustees  hved  and  did  business  in  ^Massachusetts. 
The  real  estate  was  in  ^Massachusetts.  The  terms  of 
the  trust  instnmient  are  not  given  and  the  court  did 
not  consider  the  distinction  between  trust  and  part- 
nership. The  court  said:  "This  propertj'  was  a  valu- 
able interest  in  real  estate  in  Cambridge,  the  legal  title 
to  which  was  held  bj^  trustees."  ''Although  the  tes- 
tator held  only  an  equitable  interest  in  this  real  estate 
instead  of  a  legal  interest  we  perceive  no  difference  in 
principle  between  the  passing  of  this  interest  in  suc- 
cession and  the  passing  of  his  interest  under  a  mort- 
gage held  in  like  manner  as  security  for  a  debt.    We 

original  subscriber  cannot  on  the  ground  of  fraud  on  the  original  sub- 
scriber claim  to  rescind  and  recover  the  original  consideration.  But  a 
certificate  that  a  holder  was  entitled  to  one  share  in  certain  property 
gives  a  claim  in  damages  against  the  proprietors  of  the  land  who  issued 
the  certificates  if  the  title  to  part  of  the  land  failed.  Wright  v.  Swayne, 
.5  B.  Mon.  441  (Ky.). 

An  organization  to  speculate  in  a  town  site,  at  first  said  to  have 
been  incorporated,  but  later  (p.  49)  declared  to  be  a  joint  stock  com- 
pany or  partnership,  executed  deeds  by  its  officers  as  authorized  by  an 
irrevocable  power  of  attorney  from  each  stockholder  and  his  wife. 
Hence  title  of  all  partners  pas-sed  by  these  deeds.  Batty  v.  Adams 
County,  16  Neb.  44,  51,  20  N.  W.  15.  See  Edwards  v.  Old  Settlers 
Ass'n,  16o  H.  W.  423,  42G  (Tex.). 

•  Freedman's  Co.  v.  Earle,  110  U.  S.  710. 

82 


Chap.  II]  PROPERTY  RIGHTS  [§21 

are  of  opinion  that  all  this  property  is  subject  to  the 
tax  upon  succession  prescribed  by  our  law."  ^ 

In  another  case  it  was  held  that  whether  the  share- 
holders were  cestuis  que  trust  or  partners  their  rights 
were  equitable  interests  in  tangible  property  within  the 
State.  ''While  the  trustees  hold  the  legal  title,  the  cer- 
tificate holders  are  the  ultimate  proprietors  of  the  prop- 
erty which  is  held  and  managed  for  their  benefit  and 
which  must  be  divided  among  them  at  the  termination 
of  the  trust.  Their  rights  constitute  not  choses  in 
action  but  substantial  property  rights."  ^ 

In  another  case  it  was  decided  that  the  words  of  a 
statute,  *'his  estate  found  here"  (which  is  to  be  admin- 
istered according  to  Massachusetts  law)  includes  not 
only  stock  in  Massachusetts  corporations  but  ''shares 
in  the  Western  Real  Estate  Trust."  "The  trustees  are 
resident  in  this  Commonwealth  and  their  home  business 
office  is  here,  where  only  can  the  certificates  be  trans-, 
ferred  upon  surrender  and  new  certificates  issued. 
The  certificate-holder  is  at  least  the  owner  of  an  un- 
divided equitable  interest  in  the  property  held  by  the 
trustees.  There  is  on  principle  in  this  respect  no 
distinction  between  such  certificate  and  a  certificate 
for  shares  of  stock  in  a  domestic  corporation."  ^ 

An  action  was  brought  to  recover  a  legacy  tax  col- 
lected by  the  United  States  under  the  War  Tax  of  1898 
on  certain  shares  in  fifteen  different  real  estate  trusts. 
The  issue  was  whether  the  interests  of  the  shareholders 
in  those  trusts  were  real  or  personal.    To  the  extent 

7  Kinney  v.  Treasurer,  207  Mass.  368,  93  N.  E.  586. 

8  Peabody  v.  Treasurer,  215  Mass.  129,  102  N.  E.  435. 

9  Kennedy  v.  Hodges,  215  Mass.  112,  114,  102  N.  E.  432.  See 
Graves  v.  Shaw,  173  Mass.  205,  53  N.  E.  372,  and  Bellows  Falls 
Power  Co.  v.  Commonwealth,  222  Mass.  (Decided  September  15, 
1915.) 

83 


§  21]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

that  they  were  personal  property  they  were  taxable; 
if  real  estate  they  were  not  taxable.  The  plaintiff  con- 
tended that  to  the  extent  that  the  property  owned  by 
the  several  trusts  was  real  estate,  the  shares  were  equi- 
table interests  in  real  estate  and  the  tax  was  illegally 
assessed.  The  trust  deeds  were  of  the  common  type 
but  differed  in  many  details,  especially  in  the  extent 
of  power  vested  in  the  shareholders  to  control  or  direct 
by  votes  at  meetings  or  by  writings  signed  by  certain 
proportions  of  them,  the  business  to  be  done  by  the 
trustees,  the  amendment  of  the  trust  agreement,  and 
the  termination  of  the  trust.  All  the  agreements  except 
one  fixed  a  time  when  the  trust  should  terminate,  and 
in  all  of  them  a  prescribed  number  of  shareholders  could 
terminate  the  trust  by  vote  or  writing  at  any  time.  The 
provisions  as  to  a  sale  of  the  property  on  termination 
varied.  In  some  the  trustees  had  discretionary  power 
to  sell  at  any  time  without  the  consent  of  the  sharehold- 
ers; in  others  the  trustees  had  that  right  with  the  con- 
sent of  the  shareholders;  in  others  there  was  no  provi- 
sion for  sale  except  on  special  authorization  by  the 
shareholders.  One  of  the  trusts  had  cash  on  hand  at 
the  time  of  the  death  of  the  shareholder,  but  was  obli- 
gated in  a  larger  amount  to  buy  certain  land.  On  the 
theory  that  equity  will  regard  as  done  what  ought  to 
be  done,  the  court  ruled  that  it  should  treat  that  cash 
as  real  estate  unless  it  had  to  be  treated  as  personalty 
under  the  stipulations  of  the  trust  agreement  to  be  con- 
sidered later.  In  another  trust  which  had  cash  on  hand, 
there  was  a  provision  for  a  reserve  fund  but  the  court 
said  that  the  reserve  fund  should  come  out  of  the  gross 
income  and  would  not  effect  the  equitable  conversion  of 
the  cash  on  hand  into  real  estate  for  the  purchase  of 

84 


Chap.  II]  PROPERTY  RIGHTS  [§21 

which  it  had  been  accumulated.  The  court  held  that 
the  provision  in  most  of  the  trust  agreements  for  a  final 
termination  and  distribution,  whether  imperative  or 
discretionary,  would  not  effect  an  equitable  conversion 
of  the  property  at  the  time  of  the  death  of  the  share- 
holder, because  at  that  time  the  period  for  conversion 
had  not  arrived.  None  of  the  trust  agreements  con- 
tained an  imperative  direction  to  the  trustees  to  sell  the 
trust  property  during  the  life  of  the  trust  and  the  court 
therefore  held  that  the  real  estate  was  not  equitably 
converted  into  personal  property  upon  the  conclusion 
of  the  trust  agreements  or  upon  the  death  of  the  share- 
holder. It  was  contended  that  the  provision  that  the 
shareholder  should  have  no  legal  or  equitable  interest 
in  the  trust  property  indicated  that  the  right  of  the 
shareholders  was  nothing  but  a  chose  in  action,  but  the 
coiu-t  pointed  out  that  it  had  been  held  in  Massachusetts 
that  the  shareholders'  interest  is  not  a  mere  chose  in 
action  but  an  equitable  interest  in  the  corpus  of  the 
trust,  and  the  provision  above  referred  to  was  not 
sufficient  to  change  this  rule,  because  in  each  of  the 
trusts  where  it  occurred  the  shareholders  reserved  either 

(a)  the  power  to  control  the  trustees  in  the  sale  and 
disposition  of  the  property,  to  instruct,  remove,  re- 
place trustees,  amend  and  terminate  the  declaration 
of  trust,  and  to  order  a  conveyance  to  themselves;  or 

(b)  a  right  to  authorize  a  sale  or  mortgage,  to  rebuild, 
to  remove  trustees,  and  to  terminate  the  trust  when  the 
property  shall  be  conveyed  to  the  shareholders;    or 

(c)  to  authorize  sales,  in  which  case  the  trustees  were 
required  to  pay  over  the  net  proceeds,  the  right  to 
mortgage  and  rebuild,  remove  trustees,  terminate  the 
trust,  and  having  terminated  it  require  a  conveyance  of 

85 


§  21]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

the  property  to  the  shareholders.  ''Under  such  circum- 
stances it  cannot  reasonably  be  said  that  they  have  no 
right,  title  or  interest  in  the  property,  and  that  their 
interest  as  shareholders  is  a  mere  chose  in  action."  In 
a  number  of  other  trusts  it  was  provided  that  the 
shares  should  be  personal  property.  It  was  contended 
that  this  implied  an  imperative  direction  of  the  trus- 
tees to  convert  the  real  estate.  The  court  said:  ''It  is 
plain  that  the  mere  declaration  of  the  creator  of  the 
trust  that  real  estate,  or  equitable  interest  in  real 
estate,  shall  be  considered  as  personalty,  will  not  give 
it  that  nature.  You  cannot  impress  upon  real  estate  the 
character  of  descendibility  according  to  the  rules  appH- 
cable  to  personal  estate  without  directing  the  real  estate 
to  be  sold."  In  these  particular  trusts,  taking  all  their 
provisions  into  consideration,  the  court  had  no  doubt 
that  the  power  of  sale  intended  to  be  vested  in  the  trus- 
tees, if  any,  was  discretionary.  In  two  of  the  trusts  the 
trust  was  to  continue  for  twenty  years  unless  sooner 
terminated,  and  the  trustees  were  to  improve,  lease 
or  sell  the  real  estate  subject  to  the  control  or  direction 
of  two-thirds  of  the  shareholders,  but  with  the  power 
to  act  according  to  their  discretion  unless  they  had  re- 
ceived instructions.  The  court  said  that  this  indicated 
that  so  far  as  they  had  any  powers  vested  in  them  they 
were  discretionary.  "The  provision  for  assignability 
of  shares  without  complying  with  the  formalities 
necessary  for  a  conveyance  of  real  estate  does  not  make 
them  personal  property.  They  represent  equitable 
interests  in  the  corpus  of  the  trust  and  their  character  is 
determined  by  the  nature  of  the  corpus  and  if  the  corpus 
is  real  estate  it  would  seem  that  the  transferability 
would  depend  upon  the  law,  governing  the  transfer  of 

86 


Chap.  II]  PROPERTY   RIGHTS  [§21 

interests  in  real  estate  in  the  place  where  the  real  estate 
was  situated  in  the  absence  of  legislative  authority 
making  special  provision  for  their  transfer."  The  court 
therefore  held  that  to  the  extent  that  the  corpus  of  the 
property  was  real  estate  or  cash  directed  or  agreed  to 
be  invested  therein,  the  tax  was  illegal.^" 

If  the  dictum  last  quoted  is  sound,  the  transferabil- 
ity of  shares  in  associations  or  trusts  owning  real  estate 
becomes  of  little  value.  It  is  to  be  hoped  that  when  the 
question  comes  before  the  courts  for  direct  decision  it 
will  be  held  that  the  interest  of  the  cestui  que  trust  is  a 
chose  in  action  and  that  the  right  of  a  shareholder  in  an 
association  or  a  trust  owning  real  estate  may  be  trans- 
ferred without  the  formalities  required  of  transfers  of 
legal  interests  in  real  estate.  The  question  may  well 
be  avoided,  however,  by  proper  provision  in  the  deed 
of  trust  for  an  imperative  conversion  of  the  real  estate 
into  personality  but  to  be  postponed  in  the  discretion 
of  the  trustee. 

The  assignee  of  a  shareholder  will  take  his  share 
subject  to  the  equity  of  his  co-partners  to  have  the 
property  applied  in  payment  of  firm  debts. ^^  A  pledgee 
of  a  certificate  for  shares  gets  rights  superior  to  a 
creditor  who  attaches  the  undivided  interest  of  the 
shareholder  in  the  property  of  the  association.^^    A  deed 

10  Bartlett  v.  Gill,  221  Fed.  476  (D.  C.  —  Mass.). 

"  Sale  of  share  in  a  mine.  Duryea  v.  Burt,  28  Cal.  569,  577, 
586. 

12  Citizens'  Bank  v.  Bank  of  Commerce,  80  Kan.  205,  101  Pac. 
1005. 

A  joint  stock  association  was  formed  to  develop  timber  lands.  The 
trustee  held  three-quarters  of  the  shares.  He  mortgaged  his  interest 
to  a  bank  and  then  conveyed  it  to  his  brother.  The  documents  sug- 
gest that  the  parties  were  trying  to  convey  real  estate  and  not  shares,  but 
the  certificates  were  also  dehvered  to  the  mortgagee.  Held:  Though 
this  is  a  partnership  the  shareholder  could  mortgage  his  interest  what- 
ever that  might  be.    The  mortgage  is  valid  and  the  conveyance  to  the 

87 


§  22]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

of  land  describing  the  grantee  in  its  association  name 
vests  title  in  those  who  are  ascertained  to  have  been 
members  of  the  association  at  the  time,  at  least  if  the 
firm  name  does  not  contain  the  name  of  any  individual 
partner. ^^  If  the  firm  name  does  include  the  name  of 
any  partner  some  courts  would  hold  that  title  vests  in 
that  partner  in  trust  for  the  firm.^^  An  association  can 
acquire  by  prescription  a  right  of  way  over  adjoining 
land  of  one  of  its  members. ^^ 

§  22.  Powers  of  Members  of  Associations  for  Profit 

The  officers  of  such  associations  may  be  held  to  have 
implied  power  to  bind  it  by  their  acts  within  the  scope 
of  the  purposes  of  the  association.^    A  curious  exception 

brother  gave  simply  an  equity  of  redemption.  The  rights  of  credi- 
tors do  not  intervene  here.  Stringham  v.  Durkee,  8  Wis.  1,  123, 
126. 

13  Byam  v.  Bickford,  140  Mass.  31,  32,  2  N.  E.  687.  In  Pomeroy  v. 
Latting,  2  Allen  221,  a  mortgage  to  "The  Copake  Iron  Works"  was 
foreclosed  by  a  writ  of  entry  brought  by  the  individuals  who  composed 
a  firm  of  that  name. 

Though  a  "deed  to  an  unincorporated  company  and  their  successors 
might  be  void"  on  ground  of  uncertainty  a  deed  to  trustees  and  their 
successors  in  trust  for  the  stockholders  and  their  heirs  in  proportion  to 
the  stock  owned  by  each  would  be  enforced.  Natchez  v.  Minor,  17 
Miss.  544. 

"  Beaman  -y.  WTiitney,  20  Me.  413,  420. 

15  Bradley  Fish  Co.  v.  Dudley,  37  Conn.  137,  143. 

1  Secretary  may  substitute  new  tenant  under  a  lease.  McNeal  v. 
Market  Co.,  43  Pa.  Sup.  Ct.  420,  427. 

Treasurer  may  bind  by  promissory  note.  Here  it  purported  in  the 
body  of  the  note  to  be  given  by  him  in  his  official  capacity.  Kierstead 
V.  Bennett,  93  Me.  328,  332,  45  Atl.  42;  Dow  v.  Moore,  47  N.  H.  419, 
424. 

So  of  a  note  signed  by  agent,  Kenyon  v.  Williams,  19  Ind.  44,  48; 
Manning  v.  Gasiiarie,  27  Ind.  399;  and  a  note  of  managers  of  a  syndi- 
cate to  buy  securities.  Continental  National  Bank  v.  Heilman,  81 
Fed.  36,  41;  but  not  on  an  accommodation  endorsement,  Odiorne  v. 
Maxey,  13  Ma-ss.  178,  181 ;  nor  after  dissolution,  Lake  v.  Munford,  4 
Sm.  &  M.  (Miss.)  312,  319. 

An  officer  was  held  properly  removed  by  vot("  of  the  shareholders. 
Inderwick  v.  Sndl,  2  Mac.  &  G.  216. 

88 


Chap.  II]  POWERS  OF  MEMBERS  [§  22 

has  grown  up  in  the  case  of  mining  partnerships.  The 
managing  agent  has  imphed  power  to  bind  the  individ- 
ual members  of  the  firm  only  on  contracts  for  supplies 
or  labor  necessary  to  the  working  of  the  mine.  This 
exception  has  been  explained  on  the  ground  that  it  is  a 
necessary  consequence  of  the  fact  that  the  usual  rule 
of  delectus  personae  does  not  apply  to  mining  partner- 
ships. In  a  case  where  the  superintendent  of  a  mining 
partnership  gave  a  note  for  the  purchase  of  ditches  for 
use  in  the  mining  without  express  authority,  the  court, 
while  finding  ratification  from  the  fact  that  payments 
were  made  on  it  with  the  knowledge  and  acquiescence 
of  all  the  partners,  laid  down  the  general  rule  as  above 
stated  and  said:  "Mining  partnerships,  where  there 
are  no  partnership  articles,  are  governed  by  the  law  of 
ordinary  partnerships,  except  so  far  as  the  general 
usage  of  persons  engaged  in  similar  piu-suits  or  the  es- 
tablished practice  of  the  particular  company  has  estab- 
lished a  different  rule.  The  only  differences  generally 
existing  .  .  .  are  such  as  legitimately  flow  from  the  fact 
that  in  such  partnerships  there  is  no  delectus  personae."  ^ 

2  There  were  numerous  changes  of  the  members  but  the  incoming 
members  all  knew  of  the  debt.  The  creditor  became  a  partner  and 
brought  a  biU  for  winding  up  and  appUcation  of  assets  to  payment  of 
debts.  It  was  held  that  the  firm  continued  hable  though  some  mem- 
bers had  sold  then-  shares  and  new  members  who  bought  with  fuU 
knowledge  took  subject  to  debts.  Former  partners  who  once  were 
hable  are  not  necessary  parties  to  this  proceeding  (p.  194).  Jones  v. 
Clark,  42  Cal.  180,  191,  193. 

Members  of  a  mining  partnership  are  liable  for  suppUes  bought  on 
credit  essential  to  the  carrying  on  of  the  business  though  as  between 
themselves  it  was  agreed  that  certain  of  the  partners  should  not  be 
Hable  for  its  debts.  Hence  attorneys  who  took  shares  in  payment  for 
legal  services  were  Hable.  ManviUe  v.  Parks,  7  Col.  128,  135,  2  Pac. 
212. 

The  power  of  one  partner  to  bind  another  is  adopted  from  the  law 
merchant  and  appHes  to  commercial  partnership  only.  In  other  part- 
nerships plaintiff  must  prove  express  authority  or  custom  or  usage  of 
that  particular  branch  of  business.    The  one  is  a  question  of  law,  the 

89 


§  22]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

It  would  seem,  however,  that  this  doctrine  is  probably 
due  to  a  misunderstanding  of  the  early  English  cases 
on  mining  partnerships,  in  which  it  was  held  that  mem- 
bers could  bind  their  co-partners  on  simple  contracts, 
but  not  on  negotiable  instruments,  on  the  theory  that 
such  firms  wfere  not  trading  concerns.  It  is,  of  course, 
well  settled  that  members  of  firms  that  are  not  trading 
or  commercial  partnerships  have  no  implied  power  to 
bind  their  co-partners  by  issuing  negotiable  commercial 
paper,^ 

other  of  fact  (p.  75).  Hence  a  member  of  a  mining  partnership  had 
no  power  to  bind  the  other  on  a  contract  to  purchase  lands.  Judge  v. 
Braswell,  76  Ky.  67. 

Members  of  a  mining  partnership  are  hable  on  labor  claims  not  ex- 
pressly authorized.    Nolan  v.  Lovelock,  1  Mont.  224,  228. 

Members  of  a  mining  partnership  were  held  personally  Hable  for 
money  borrowed  by  the  manager  and  used  in  the  necessary  prosecu- 
tion of  the  business  of  operating  the  mine.  There  was  evidence  of 
knowledge  and  acquiescence  of  defendants.  Randall  v.  Meredith,  11 
S.  W.  170,  173  (Tex.). 

^  Acting  directors  of  a  mining  company  had  power  to  bind  a  share- 
holder by  contracts  made  in  the  usual  way  of  conducting  such  a  con- 
cern, in  the  absence  of  knowledge  of  the  plaintiff  of  a  restriction  to 
cash  dealings.     Hawken  v.  Boiu-ne,  8  M.  &  W.  703,  710. 

A  shareholder  in  a  mining  partnership  was  held  hable  for  goods  sup- 
pUed  on  order  of  directors  for  ordinary  use  in  the  mine.  Abinger  says 
that  though  Dickinson  v.  Valpy  held  that  a  mining  company  is  not 
necessarily  formed  with  the  power  to  pledge  the  credit  of  individual 
members  by  drawing  biUs,  it  is  for  the  jury  to  say  whether  directors 
have  power  to  bind  members  by  dealing  on  credit  (p.  465).  Parke 
says:  "  No  point  was  made  at  trial  tha:  this  was  such  a  partnership  as 
could  not  deal  on  credit.  If  it  had,  the  plaintiff  could  probably  have 
supphed  evidence  on  that  point"  (p.  466).  Tredwen  v.  Bourne,  6  M. 
&  W.  461. 

A  member  of  a  mining  partnership  has  not  as  such  implied  author- 
ity to  borrow  money  on  the  credit  of  the  association  and  other  members 
are  not  liable  for  such  debts.  This  is  so  even  if  he  is  general  manager. 
Rioketts  v.  Bennett,  4  M.  G.  &  S.  686,  698. 

In  absence  of  evidence  that  it  was  necessary  to  the  business  of  a 
mining  (company  as  of  a  trading  company  to  bind  members  by  draw- 
ing bills  of  (!Xchango,  a  shareholder  is  not  hable  on  one  in  the  name  of 
the  company  drawn  by  order  of  directors.  Dickinson  v.  Valpy,  10  B. 
&  C.  128,  136. 

Gencinil  agent,  of  mining  conij)any  has  no  implied  authority  to  borrow 
money  of  u  bank  to  pay  workmen  who  have  attached  materials  even 

90 


Chap.  II]  POWERS  OF  MEMBERS  [§  22 

There  have  been  some  decisions  suggesting  imphedly 
the  applicabihty  of  the  doctrine  of  ultra  vires  as  appUed 
to  corporations,'*  but  in  most  cases  the  usual  agency 
rules  alone  are  involved.  ^  The  election  of  an  officer  must 
be  proved  by  the  records,  if  available,  not  by  parol.^ 

in  such  an  emergency.  Shareholders  not  hable.  Hawtayne  v.  Bourne, 
7  M.  &  W.  595,  599. 

When  the  agent  has  express  authority,  it  has  been  held  that  all 
partners  are  bound.  A  mining  partnership  voted  at  a  meeting  to  au- 
thorize a  contract  with  the  plaintiff  to  erect  a  mill  which  contract  was 
later  signed  in  the  firm  name  by  the  secretary.  There  were  no  written 
rules  but  the  company  usually  did  business  this  way.  A  purchaser  of 
a  share  previous  to  this  contract  who  had  never  attended  meetings  or 
taken  an  active  part  in  the  management  of  the  partnership  affairs  or 
held  himself  out  to  the  world  as  a  partner  was  held  liable  on  this  con- 
tract. "It  may  be  a  matter  of  regret  that  our  courts  have  gone  to  the 
extent  they  have  in  excepting  mining  partnerships  from  the  general 
law  of  partnerships."    Taylor  v.  Castle,  42  Cal.  367,  371. 

When  a  member  of  a  mining  partnership  is  bound  by  the  act  of  his 
co-partner  he  is  bound  to  the  fuU  extent  of  the  liabiUty  (p.  371).  So 
for  suppUes  necessary  for  the  usual  working  of  the  mine  (p.  372).  A 
mining  partnership  under  the  code  arises  only  when  the  owners  work 
the  mine,  not  when  they  lease  it  on  shares  to  an  outsider  (p.  372). 
Stuart  V.  Adams,  89  Cal.  367,  26  Pac.  970. 

A  member  of  a  mining  partnership  was  held  liable  for  wages  of  an 
employee  hired  by  the  manager  regardless  of  hmitations  in  the  articles. 
(No  distinction  made  between  this  and  a  general  partnership.)  Burgan 
V.  Lyell,  2  Mich.  102,  103. 

^  Grantor  of  land  to  a  joint  stock  association  in  excess  of  its  statu- 
tory power  to  hold  cannot  proceed  to  set  it  aside.  That  is  a  province 
•  of  the  State.    Howell  v.  Earp,  21  Hun  393,  395. 

Managing  a  hotel  was  held  within  the  powers  of  a  seaside  land  com- 
pany because  the  land  on  which  it  stood  was  included  in  the  .descrip- 
tion in  the  original  deed  to  the  trustees  of  the  association.  Quimby  v. 
Tapley,  202  Mass.  601,  89  N.  E.  167. 

*  Shareholders  in  an  informal  association  to  run  stage  hues  were 
sued  in  a  winding  up  proceeding.  Held :  All  stockholders  are  Hable  to 
creditors  without  notice  for  acts  of  directors  even  outside  the  objects 
of  the  association.  AU  hable  to  contribution  for  acts  within  scope  of 
association.  Shareholders  who  had  knowledge  of  acts  of  directors  and 
ratified  them  by  silent  acquiescence  are  liable  even  to  creditors  who 
had  notice.     Rianhard  v.  Hovey,  13  Ohio  300,  302. 

^  Saltsman  v.  Shults,  14  Hun  256. 

The  acts  of  an  unincorporated  association  may  be  proved  by  parol, 
though  they  kept  a  record.  Wilhs  v.  Chapman,  68  Vt.  459,  467,  35 
Atl.  459;  Newell  v.  Borden,  128  Mass.  31. 

The  assessment  book  of  a  mining  association  which  was  accessible 
to  members  and  of  the  contents  of  which  a  member  had  knowledge  and 

91 


§  22]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

It  has  been  held  that  individual  members  of  such  an 
association  have  not  implied  power  to  bind  it  by  their 
acts,  like  ordinary  partners.^  The  courts  will  enforce 
reasonable  regulations  of  associations  for  profit  ^  but 

the  correctness  of  which  had  never  been  disputed  was  admissible  against 
him  as  to  the  extent  of  his  ownership.  Abernathie  v.  Virginia  Co.,  16 
Nev.  260,  268. 

^  Spotswood  V.  Morris,  12  Idaho  360,  384,  85  Pac.  1094,  1102; 
OUver's  Estate,  136  Pa.  St.  43,  59,  20  Atl.  527;  WiUis  v.  Greiner,  26  S. 
W.  858  (Tex.  Civ.  App.). 

In  the  case  of  mining  partnerships  it  has  been  held  that  a  member 
has  no  imphed  power  to  bind  the  other  members  on  any  contract.  The 
reason  assigned  is  that  the  rule  of  delectus  personae  does  not  apply  to 
association  with  transferable  shares  and  therefore  the  mutual  confi- 
dence which  should  accompany  the  power  to  impose  unUmited  ha- 
bihty  on  fellow  members  is  lacking.  Skillman  v.  Lachman,  23  Cal. 
198,  206. 

The  owners  of  the  mine  as  tenants  in  common  in  the  working  of  it 
were  partners.  "As  mining  partnerships  are  not  usually  founded  on 
the  delectus  personae,  the  powers  of  the  individual  members  of  the  firm 
are  much  more  limited  than  are  the  powers  of  the  individual  members  of 
a  purely  commercial  or  trading  partnership."  Those  holding  the  major- 
ity interest  control  its  pohcy,  but  their  conduct  will  be  most  jealously 
scrutinized.     Dougherty  v.  Creary,  30  Cal.  290,  300. 

Members  of  an  irrigation  association  who  own  a  ditch  and  convey 
water  and  sell  it  to  miners  for  mining  purposes  are  not  like  an  ordinary 
commercial  partnership.  A  member  has  no  implied  authority  to  bind 
the  members  by  his  contracts.  A  managing  agent  has  no  authority 
but  that  conferred  on  him  either  expressly  or  by  necessary  implica- 
tion from  his  acts  recognized  by  the  company  with  full  knowledge  of 
the  acts  at  the  time  of  recognition  (p.  370).  This  was  on  a  note  given 
for  lumber  to  repair  the  ditch.  The  members  so  far  as  informed  were 
told  that  the  lumber  was  to  be  paid  for  out  of  proceeds  of  sale  of  water 
(p.   371).     McConneU  v.  Denver,  35  Cal.  365. 

When  members  of  a  mining  partnership  disagree  the  majority  in 
interest  control  but  arc  said  to  be  liable  to  the  minority  for  "culpable 
negligence  or  breach  of  duty."  Bartlett  v.  Boyles,  66  \V.  Va.  327,  330, 
66  S.  E.  474. 

There  is  a  curious  old  case  of  an  association  to  run  a  steamboat 
which  the  court  said  was  not  a  partnership,  in  which  it  was  also  said: 
"The  general  f)rinciple  of  law  is  that  in  such  private  associations  the 
majority  cannot  bind  tiio  minority  unless  it  be  by  special  agreement." 
A  stipulation  for  majority  vote  was  held  to  apply  only  to  the  details 
of  iiianagcitient  and  not  to  fundamentals.  Livingston  v.  Lynch,  4 
.John.s.  Ch.  573. 

•*  WIktc  by-laws  provided  that  tellers  be  appointed  by  stockholders 
anfl  they  wen;  ap})()iiit(!d  l)y  the  chairman  against  the  protest  of  the 
Hliarclioldens  an  elecrtion  so  held  was  void.  Tidewater  Pipe  Co.  v. 
Xattorfield,  12  Weekly  Note  Cas.  457. 

92 


Chap.  II]  POWERS  OF   MEMBERS  [§22 

it  has  been  held  that  the  members  are  not  bound  by 
unreasonable  ones.^  The  majority  have  no  power  to 
violate  the  articles  of  agreement  without  unanimous 
consent.^''  A  member  of  an  association  buying  up 
notes  of  the  association  in  fact  pays  his  own  obligation. 
Equity,  however,  will  keep  them  alive  for  purposes  of 
accounting   and   contribution,   but   will   not   let   him 

^  Action  by  a  shareholder  in  a  partnership  association  for  labor  per- 
formed for  it.  Its  by-laws  provided  that  all  members  should  be  bound 
by  its  rules  and  regulations  from  time  to  time  adopted.  It  passed  a 
resolution  that  its  funds  should  be  appUed  to  developing  the  business 
instead  of  paying  the  employees.  Held:  This  does  not  prevent  plain- 
tiff from  suing  for  his  labor  though  it  is  conceded  that  stockholders 
would  be  bound  by  regulations  from  time  to  time  adopted  if  they  are 
reasonable.  McCarthy  v.  Caledonia  Coal  Co.,  164  Mich.  692,  130 
N.  W.  207. 

But  where  a  clause  in  the  deed  of  trust  of  an  EngUsh  unincorporated 
joint  stock  company  provided  that  a  special  meeting  could  remove  an 
officer  "for  negligence,  misconduct  or  any  other  reasonable  cause," 
it  was  held  not  to  mean  such  a  cause  as  a  court  would  find  bona  fide 
and  founded  on  sufficient  evidence,  but  such  cause  as  the  shareholders 
duly  assembled  deem  reasonable.  Inderwick  v.  Snell,  2  Mac.  &  G. 
216. 

1"  Brewing  company.  Held:  One  person  could  not  be  appointed 
at  a  general  quarterly  meeting  in  place  of  the  two  originally  appointed 
under  the  deed  unless  with  the  consent  of  all  subscribers.  Davies  v. 
Hawkins,  3  Maule  &  Selwyn  488. 

A  company  was  formed  to  build  a  corn  exchange.  Deed  of  settle- 
ment limited  the  amount  of  each  shareholder's  subscription  and  re- 
stricted the  authority  of  the  directors  to  borrow.  The  directors  bor- 
rowed and  incurred  debts.  Held:  Could  not  charge  shareholders  for 
either  beyond  the  amount  of  their  subscriptions.  Worcester  Corn 
Exchange  Company's  Case,  3  De  G.  M.  &  G.  180. 

A  partnership  association  was  formed  to  deal  in  lands  in  Wisconsin. 
There  was  a  bill  by  a  shareholder  alleging  fraud  of  the  officers  and  mem- 
bers in  getting  title  in  severalty  to  part  of  the  land  through  taking  up 
mortgages.  Held:  Plaintiff  cannot  contend  that  the  mortgages  and 
assignments  were  invalid  because  authorized  at  meetings  held  outside 
the  State  because  he  voted  by  proxy  at  them.  The  managers  had  au- 
thority to  mortgage.  Their  meetings  are  presumed  to  be  regular. 
Stradley  v.  Cargill  Co.,  135  Mich.  367,  375,  97  N.  W.  775. 

The  rights  of  mining  partners  so  nearly  partake  of  the  rights  of  co- 
tenants  that  the  majority  interest  in  case  of  disagreement  have  no 
right  to  sell  and  convey  the  interest  of  the  minority  in  a  mining  lease 
(p.  269).  All  the  partners  are  liable  on  a  contract  made  by  the  majority 
not  in  neghgence  or  bad  faith  (p.  270).  Edinger  v.  Southern  Oil  Co., 
69  W.  Va.  34,  71  S.  E.  266. 

93 


§  23]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

make  a  profit  out  of  them;  ^^  nor  can  a  member  make  a 
secret  profit  out  of  a  competing  business. ^^  It  has  been 
held  that  an  officer,  because  he  is  a  partner,  is  not 
entitled  to  pay  for  his  services  in  the  absence  of 
agreement.  ^^ 

§  23.  Pleading  of  Informal  Associations  for  Profit 

In  litigation  by  or  against  the  association  all  members 
should  be  joined  as  parties  ^  unless  the  non-joinder  is 

"  Coleman  v.  Coleman,  78  Ind.  344,  346. 

Members  cannot  make  a  secret  profit  at  the  expense  of  the  associa- 
tion.    McDowell  V.  Joice,  149  111.  124,  36  N.  E.  1012. 

Promoters  owe  a  fiduciary  obligation  to  each  other  (dictum).  Cortes 
Co.  V.  Tannhauser,  45  Fed.  730. 

A  promoter  was  held  liable  to  members  of  his  syndicate  for  a  secret 
profit  both  on  grounds  of  agency  and  as  a  partner.  Baltimore  Trust 
Co.  V.  Hambleton,  84  Md.  456,  36  Atl.  597. 

One  of  a  group  engaged  in  a  real  estate  deal  was  held  hable  for  a 
secret  profit.  The  court  said  it  was  not  necessary  to  decide  whether 
it  was  a  partnership  or  not  because  there  is  the  same  fiduciary  obhga- 
tion  between  parties  engaged  in  a  common  enterprise  whether  partners 
or  not.    Bestor  v.  Barker,  106  Ala.  240,  17  So.  389. 

Plaintiff  sued  as  subscriber  to  an  agreement  to  buy  land.  In  fact 
the  land  belonged  to  the  defendants  who  also  subscribed  but  did  not 
disclose  their  interest.  Held:  Circulating  such  a  paper  was  a  false 
representation.  Defendants  also  hable  for  secret  profit  as  partners. 
Getty  V.  Devlin,  54  N.  Y.  403,  412. 

^  An  association  was  formed  to  send  a  party  of  members  to  Cali- 
fornia for  gold.  The  association  provided  the  outfit  for  eight  members, 
who  were  to  have  one-half  the  profits  of  their  work,  the  rest  to  go  to 
the  association.  On  reaching  California  they  broke  up  and  worked 
separately  and  defendant  struck  gold.  Held :  He  is  boimd  to  share  this 
with  the  other  members  of  the  association.  Though  a  partnership 
may  be  dissolved  by  act  of  a  member  this  should  be  communicated  to 
the  others.  It  does  not  api)ear  that  the  eight  did  more  than  decide  to 
work  sei)arately.  They  W(!re  in  the  position  of  employees  and  bound 
by  their  contract.    Eagle  v.  Bucher,  6  Ohio  St.  295,  301. 

But  this  does  not  ajjply  after  the  original  enterprise  has  been  prop- 
erly abandoned.  Mining  venture.  Waring  v.  Cram,  1  Pars.  Sel.  Eq. 
C[i.s.  510. 

"  Since  a  joint  stock  association  is  only  a  i)ar(norship  a  shareholder 
who  HCTVcs  us  secretary  and  treasurer  without  stii)ulating  as  to  his  pay 
cannot  recover  for  the  services.     Re  Fry,  4  Phila.  129,  133. 

'  Metal  Stamping  Co.  v.  Crandall,  Fed.  Cas.  No.  9493  C  (bill  of 
revivor  by  an  association  which  liad  acquired  title  to  certain  patents 

94 


Chap.  II]    PLEADING  OF  INFORMAL  ASSOCIATIONS      [§  23 

not  pleaded  in  abatement.^  This  rule,  however,  is  of 
course  modified  by  the  general  rule  of  equity  as  to  suits 
in  which  the  parties  on  one  side  or  the  other  are  very 
numerous,  viz.,  that  it  is  sufficient  if  enough  are  joined 
to  represent  fairly  all  others  of  like  interest.^  When 
members  of  the  association  are  sued,  the  plaintiff  must 
prove  the  joint  liability  of  all  defendants  or  dismiss  as  to 
those  not  liable.^  The  association  cannot  be  made  a 
party  in  its  association  name  ^  unless  there  is  express 

after  death  of  inventor  in  whose  name  suit  was  originally  brought. 
Should  have  proceeded  by  supplemental  bill  in  names  of  all  partners) ; 
Williams  v.  Michigan  Bank,  7  Wend.  539;  Montgomery  v.  Knox,  20 
Fla.  372,  380  (bill  for  receiver  by  members  of  mutual  fire  insurance 
association). 

2  McCreary  v.  Chandler,  58  Me.  537. 

If  the  defendant  pleads  non-joinder,  he  must  give  the  names 
of  the  other  partners.  Kingsland  v.  Braisted,  2  Lans.  17,  20 
(N.  Y.). 

*  A  few  of  the  shareholders  of  an  unincorporated  association  may 
sue  on  a  claim  of  the  association  without  joining  all.  To  complete  ex- 
ecution of  a  lease,  Taylor  v.  Salmon,  4  M.  &  C.  134;  to  recover  sub- 
scriptions, Walworth  v.  Holt,  4  M.  &  C.  619;  to  rescind  a  contract, 
Small  V.  Atwood,  1  Younge  407;  to  recover  misappropriated  funds, 
Chancey  v.  May,  Finch  Ch.  Cas.  592. 

Cockburn  v.  Thompson,  16  Ves.  321;  Von  Schmidt  v.  Huntington, 
1  Cal.  55;  Martin  v.  Dryden,  6  111.  187,  209  (bill  to  establish  a  trust  in 
land  bought  for  a  land  syndicate);  Mann  v.  Butler,  2  Barb.  Ch.  362, 
368  (bill  for  winding  up  a  land  trust). 

A  bill  in  equity  by  a  secretary  of  an  unincorporated  association  on 
behalf  of  himself  and  all  other  members  was  dismissed  on  the  merits. 
Another  bill  against  the  same  defendants  was  filed  in  the  name  of  the 
association  on  the  same  facts.  Held :  Res  judicala  because  of  former 
suit.  The  secretary  was  authorized  to  sue.  American,  etc.  Ass'n  v. 
Importers'  Ass'n,  114  111.  App.  136,  140. 

A  bill  to  wind  up  a  mining  partnership  alleged  that  members  were 
numerous  and  some  could  not  be  ascertained.  A  few  were  allowed  to 
represent  all  and  the  mine  was  sold  by  a  receiver.  On  a  bill  later  to 
quiet  title  held  that  the  former  decree  could  not  affect  the  title  of  ab- 
sent members  of  the  mining  partnership  for  they  held  that  title  as 
tenants  in  common.  Santa  Clara  Mining  Ass'n  v.  Quicksilver  Mining 
Co.,  17  Fed.  657,  659  (C.  C.  —  Cal.). 

*  Powell  Co.  V.  Finn,  198  111.  567,  569,  64  N.  E.  1036  (improvement 
association). 

5  Mutual  V.  Reser,  43  Ind.  App.  634,  638,  88  N.  E.  349. 
Even  where  it  has  appeared  and  answered  in  the  name  in  which  it 
was  sued.    Action  for  personal  injuries  against  bondholders  who  were 

95 


§  23]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

statutory  authority  for  such  procedure.^  An  agreement 
to  allow  an  agent  of  the  association  to  sue  in  his  own. 
name  on  contracts  made  with  the  association  will  not 
be  enforced  J    A  statute  providing  for  ser\'ice  of  process 

reorganizing  and  operating  through  an  agent.  Light  Co.  v.  Muncey, 
33  Tex.  Civ.  App.  416,  419,  76  S.  W.  931. 

In  some  cases  it  has  been  held  proper  practice  to  name  the  associa- 
tion as  a  party  with  certain  individual  members.  Here  there  was  no 
plea  in  abatement,  however.  McXeal  v.  Market  Co.,  43  Pa.  Sup.  Ct. 
420,  427.  So  bv  statute.  Inglis  v.  MUlersburg  Driving  Ass'n,  136 
N.  W.  443,  445  (Mich.). 

«  Hewitt  V.  Storey,  39  Fed.  719,  721  (C.  C.  —  Cal.)  (ditch  com- 
pany); but  the  name  actually  used  must  be  correctly  stated,  King  v. 
Randlett,  33  Cal.  318,  322. 

Camden,  etc.  R.  Co.  v.  Pennsylvania  Guarantors,  59  X.  J.  L.  328, 
35  Atl.  796;  Weaver  v.  Trustees,  etc.  Canal,  28  Ind.  112  (action  in 
name  of  trustees  authorized  by  statute). 

It  has  been  held  that  action  may  be  brought  in  the  name  of  the 
trustee  in  accordance  with  the  articles  of  association  in  the  absence  of 
statute.  Laughhn  v.  Greene,  14  la.  92,  94;  and  likewise  against  the 
trustees  as  defendants.  Mutual  v.  Reser,  43  Ind.  App.  634,  638,  88 
N.  E.  349. 

It  is  constitutional  for  the  legislature  to  authorize  unincorporated 
associations  to  sue  and  be  sued  by  their  association  name.  It  affects 
remedies  and  not  fundamental  rights.  Warner  v.  Beers,  23  Wend. 
102,  151,  152. 

Action  by  the  Akron  Brick  Association  against  one  who  had  agreed 
to  pay  for  brick  it  was  furnishing  to  sub-contractors  for  defendant. 
Defendant  set  up  that  plaintiff  was  an  illegal  association  to  suppress 
competition  and  enhance  prices.  Held :  By  statute  a  partnership  may 
sue  in  its  firm  name.  A  partnership  can  be  formed  only  for  a  lawful 
purpose.  Hence  the  association  not  being  lawful  does  not  come  within 
the  terms  of  the  statute  and  cannot  sue  in  its  o^m  name.  This  does 
not  deny  the  right  of  the  members  of  the  association  to  enforce  contracts 
in  their  own  names  which  do  not  depend  on  the  illegal  arrangement. 
Jackson  v.  Akron  Brick  Ass'n,  53  Ohio  St.  303,  41  N.  E.  257,  57  Am. 
St.  Rep.  637,  35  L.  R.  A.  287. 

An  individual  doing  business  under  a  company  name  could  not 
sue  in  that  name  under  a  statute  giving  that  right  to  associations 
(semble).  Meyer  v.  Furniture,  etc.  Co.,  76  Neb.  405,  408,  107  N.  W. 
767. 

A  special  statute  authorizing  the  president  of  an  insolvent  unin- 
corporated bank  to  sue  in  his  own  name  the  debtors  to  the  bank  is 
constitutional.  It  is  a  way  of  allowing  a  partnership  to  sue.  Lewis  v. 
McElwain,  16  Ohio  St.  347. 

'  The  rules  of  a  mutual  unincoiporated  insurance  association  pro- 
vided that  the  manager  niiglit,  sue  in  his  own  name  for  the  (contribu- 
tions due  from  the  inernbcrs.  This  was  such  an  action.  Held:  An 
agreement  to  authorize  an  agent  to  sue  on  behalf  of  an  unincorporated 

9G 


Chap.  II]    PLEADING  OF  INFORMAL  ASSOCIATIONS      [§  23 

on  an  agent  of  unincorporated  associations  is  constitu- 
tional.^ By  contracting  with  an  association  in  its  com- 
pany name  a  party  is  not  estopped  to  deny  it  is  a  cor- 
poration.^ The  members  can  sue  for  libel  as  individuals 
having  a  common  interest  in  the  business  affected.^** 
Adjustment  of  accounts  between  a  ship  master  and  an 
association  of  which  he  was  agent  was  held  not  within 
the  jurisdiction  of  admiralty/^  but  in  one  case  a  court 
of  admiralty  enforced  a  trust  in  favor  of  such  an  asso- 
ciation against  an  individual  creditor  of  the  trustee. ^^ 
Courts  of  equity  have  jurisdiction  to  appoint  a  receiver 
of  an  association  as  prayed  for  in  a  bill  containing 
allegations  of  waste. ^^ 

company  or  partnership  is  one  that  the  law  does  not  recognize.  The 
defendant's  promise  was  not  an  agreement  with  the  manager,  but  with 
him  as  agent  of  the  association.  Hence  demurrer  sustained.  Evans 
V.  Hooper,  L.  R.  1  Q.  B.  D.  45,  48. 

8  Appeal  of  Baylor,  93  S.  C.  414,  77  S.  E.  59. 

In  Massachusetts  by  statute  foreign  express  companies  are  obliged 
to  designate  an  agent  for  service  of  process.  R.  L.  Ch.  70,  §  3.  It  is 
an  interesting  problem  how  execution  could  be  levied  on  a  shareholder 
in  an  action  so  brought  where  the  company  is,  as  is  usual,  sued  in  the 
association  name. 

An  action  against  an  unincorporated  association  selling  religious 
books  was  held  properly  brought  by  service  on  the  agent  in  charge  of 
its  affairs  in  the  absence  of  statutory  authority.  Slaughter  v.  American 
Baptist  Missionary  Society,  150  S.  W.  224,  227. 

9  Re  Mendenliall,  Fed.  Cas.  No.  9425;  Williams  v.  Michigan  Bank, 
7  Wend.  539. 

i»  Bar  Co.  v.  Zimmerman,  110  Md.  313,  321,  73  Atl.  19  (attempted 
incorporation). 

11  Grant  v.  PoUion,  20  How.  162. 

1^  Members  of  a  joint  stock  company  for  mining  and  trading  in 
California  bought  a  vessel  and  stores  and  took  title  in  names  of  repre- 
sentatives whose  creditors  have  attached  it.  Libel  in  admiralty  by 
the  members  of  the  association  for  title  and  possession  to  the  vessel 
and  stores.  Decree  for  hbellants.  Attaching  creditor  had  notice  of 
the  trust  when  debt  contracted.  No  allowance  for  services  of  the 
trustee  because  of  misconduct.  The  Taranto,  Fed.  Cas.  13751  (D.  C. 
—  Mass.). 

1'  Facts  held  not  to  justify  allegation  of  plaintiff  in  an  application 
for  a  temporary  receiver  of  a  joint  stock  association  on  a  stockholder's 
bill  alleging  waste.  Dudley  v.  Piatt,  127  N.  Y.  S.  154,  70  Misc. 
322. 

97 


§  24]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

§  24.   Rights  and  Liabilities  of  Shareholders 

The  most  important  practical  question  in  the  law  of 
partnership  is  the  individual  liability  of  partners  for 
the  debts  of  the  concern.  In  accordance  with  the  rule 
applied  to  ordinary  partnerships,  when  none  of  the 
methods  discussed  hereafter  ^  by  which  shareholders  in 
associations  have  endeavored  to  avoid  this  liability  are 
adopted,  it  is  held  that  the  shareholder  or  member  is 
personally  liable  for  the  debts  of  the  association  ^  and 

1  See  §§  29-31  inclusive. 

2  Greenup  v.  Barbee's  Exec,  1  Bibb.  320  (Ky.)  (dictum);  Jenne  v. 
Matlack,  19  Ky.  Law  Rep.  503,  41  S.  W.  11  (industrial  exposition); 
Holt  V.  Blake,  47  IMe.  62  (newspaper);  Frost  v.  Walker,  60  Me.  468, 
470  (express  company);  Bain  v.  Loan  Ass'n,  112  N.  C.  248,  17  S.  E. 
154  (loan  association);  Parrott  v.  Eyre,  10  Bing.  283  (trustees  of 
turnpike  borrowed  money  not  in  accordance  with  the  statute  and  so 
were  not  reheved  of  personal  hability);  Keasley  v.  Codd,  2  C.  &  P. 
408  (member  of  London  Carrier  Co.  hable  for  goods  sold  and  delivered) ; 
Mandsley  v.  LeBlanc,  2  C.  &  P.  409  (director  of  Steam  Washing  Co. 
liable  on  contract  made  at  a  meeting  he  did  not  attend);  Bennett  v. 
Lathrop,  71  Conn.  613,  616,  42  Atl.  634  (member  of  athletic  club 
formed  to  run  a  polo  team  for  pleasure  and  profit  was  liable);  Wads- 
worth,  t^.  Duncan,  164  111.  360,  45  N.  E.  132  (shareholder  in  bank  liable 
to  depositor);  Manning  v.  Gasharie,  27  Ind.  399  (member  of  coopera- 
tive store  liable  on  note  signed  by  its  agent);  LjTich  v.  Postlethwaite, 
7  Mart.  (La.)  69,  208,  213  (stockholder  in  steamboat  company  liable 
on  contract  to  build  boat);  English  v.  Wall,  12  Rob.  (La.)  132,  135 
(member  of  banking  association  liable  on  bills  of  exchange  and  cer- 
tificates of  deposit);  Dow  v.  Moore,  47  N.  H.  419,  424  (members  of 
cooperative  store  liable  on  treasurer's  notes);  Camden  R.  Co.  v.  Penn- 
sylvania Guarantors,  59  N.  J.  L.  328,  35  AtL  796  (Members  of  insur- 
ance association  hable  on  policy);  Wells  v.  Gates,  18  Barb.  (N.  Y.) 
5.'j4,  556  (member  of  association  formed  to  publish  scientific  journal 
wa«  liable);  Nolan  v.  McNamee,  82  Wash.  585,  144  Pac.  904. 

Plaintiff  contracted  to  furnish  news  to  the  lialtimore  Newspaper 
A8.sociation.  By  tiie  terms  of  the  (contract  the  members  were  not  only 
entitled  to  uw;  the  news  themselves  but  might  sell  it  to  outsiders.  Held: 
MeinbcrH  liabl<!  as  partners.  United  Press  v.  Al;ell  Co.,  84  N.  Y.  S. 
42.5,  87  App.  Div.  6.30. 

D(!clarHtion  in  contract,  against  members  of  an  association  is  not 
deriiurrabl(!  if  it  allt'g(!.s  they  arc  organized  for  j)ecuniary  profit.  Ranken 
V.  rrohcy,  1 15  N.  Y.  S.  832,  131  Ai)p.  13iv.  328. 

,      MciiibcrH  of  a  l)ri(lg(;  l)uil(liiig  a.ssociation  formed  in  contemplation 
of  incorjioratiou  and  which  later  is  incorporated  are  personally  liable 

U8 


Chap.  II]  RIGHTS  AND   LIABILITIES  [§  24 

for  damages  caused  by  its  negligence.^  A  member  is 
liable  for  torts  of  the  association  ■*  or  of  another  mem- 
ber while  engaged  in  the  business  of  the  association.^ 

as  partners  for  debts  incurred  before  incorporation.  Broyles  v,  McCoy, 
37  Tenn.  602. 

The  liability  of  members  of  a  joint  stock  association  organized  in 
Canada  is  to  be  determined  by  the  law  of  Canada.  At  common  law 
it  is  settled  that  they  are  liable  in  solido  for  the  debts  of  the  associa- 
tion.   Cutler  V.  Thomas,  25  Vt.  73,  77. 

3  Inglis  V.  Millersburg  Driving  Ass'n,  169  Mich.  311,  136  N.  W. 
443  (negligently  burning  brush  so  that  it  fired  adjoining  property. 
Race  track  association). 

*  Farmers  Co.  v.  Jones,  147  S.  W.  668  (Tex.  Civ.  App.)  (personal 
injuries). 

A  syndicate  promoted  a  corporation  and  was  sued  by  the  corpora- 
tion for  secret  profits  made  by  the  managers  of  the  syndicate.  Held: 
All  the  partners  are  liable  for  the  acts  of  misfeasance  of  the  managing 
partners.  Not  a  personal  action  that  dies  with  the  partner.  His 
estate  can  be  held  in  equity.  New  Sombrero  Co.  v.  Erlanger,  L.  R. 
5  Ch.  D.  73,  117. 

A  sale  by  a  trustee  of  the  trust  estate  to  an  association  of  which  he 
is  a  member  is  voidable.  "All  his  associates  are  chargeable  with  the 
same  considerations  which  would  bear  upon  him  were  he  solely  inter- 
ested as  purchaser."    Robbins  v.  Butler,  24  111.  387,  432. 

^  Licensed  pilots  formed  an  association.  Pilots  took  turns  in  board- 
ing vessels,  fees  were  paid  into  a  common  fund.  Association  hired 
offices  and  boats  and  paid  expenses  out  of  funds  including  operation 
of  pilot  boats.  Plaintiff  sued  members  of  association  for  neghgence  of 
one  of  the  pilots.  Held:  Members  were  partners  and  so  liable  (p.  230). 
The  relation  between  plaintiff  and  pilot  was  not  contractual  but  com- 
pulsory. "Whether  the  respondents  are  liable  as  partners  or  not, 
there  would  seem  to  be  no  reason  why  they  should  not  be  held  jointly 
Mable  for  the  faithful  performance  of  their  duties  discharged  under  the 
circumstances  set  forth  in  the  hbel,  where  it  appears  that  although  not 
incorporated  and  therefore  not  liable  as  an  association,  they  in  effect 
act  by  joint  cooperation  in  the  discharge  of  their  duties"  (p.  233). 
Donald  v.  Guy,  127  Fed.  228  (D.  C.  —  Va.). 

Suit  in  admiralty  by  members  of  a  Tug  Line  in  contract  against 
owners  of  a  schooner  for  salvage  services.  She  was  being  towed  by  a 
tug  of  the  association  and  by  its  negligence  stranded  and  others  of  the 
association  went  to  its  assistance.  This  was  an  association  Uke  the 
pilot  association  by  owners  of  tugs.  Profits  distributed  pro  rata  agreed 
valuation  of  tugs.  Held :  Partners.  The  mutual  agency  has  been  dele- 
gated to  a  general  manager.  Liable  for  losses.  Duty  of  association  to 
do  what  these  tugs  did  to  reheve  schooner  stranded  by  negligence  of 
a  member  (p.  955).  Hence  no  imphed  contract  to  pay  for  it.  Inde- 
pendently of  partnership  the  service  was  not  rendered  with  the  idea 
of  compensation  because  of  joint  relation  of  boats  (p.  956).  Fleming 
V.  Lay,  109  Fed.  952  (C.  C.  A.  —  Ohio). 

99 


§  24]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

Though  a  national  bank  may  acquire  title  to  shares  in 
a  corporation  which  have  been  previous^  pledged  to 
it  as  security  for  a  debt,  it  is  beyond  its  power  to  take 
title  under  similar  circumstances  to  shares  in  an  asso- 
ciation for  profit  because  of  the  liabihty  incurred  by 
members  of  a  partnership.  A  partnership  was  formed 
to  purchase,  improve,  di^dde  into  lots  and  sell  a  lease- 
hold. There  were  forty  shares  in  the  firm,  represented 
by  transferable  certificates.  A  national  bank  took 
nine  of  these  as  security  for  a  debt  and  afterwards  be- 
came owner  of  them  in  satisfaction  of  the  debt,  subject 
to  the  question  whether  the  transfer  was  within  the 
powers  of  a  national  bank.  In  a  bill  for  dissolution  of 
the  partnersliip  it  appeared  that  contribution  was 
necessary  to  the  debts  of  the  firm  and  that  some  part- 
ners were  insolvent.  The  Supreme  Court  of  Ohio  held 
(69  Oh.  St.  160)  that  the  bank  was  not  a  partner  and 
therefore  not  liable  for  the  full  amount  of  the  debts  of 
the  firm,  but  that  it  became  a  part  owner  of  the  prop- 
erty and,  as  it  joined  in  the  management  of  the  same, 
was  hable  for  nine-fortieths  of  the  expenses  which  con- 
stituted the  debts  of  the  fiiTQ.  In  the  opinion  of  the 
Supreme  Court  of  the  United  States,  Holmes,  J.,  said: 
"As  the  Supreme  Court  of  Ohio  assumes  such  partner- 
ships and  certificates  to  be  vaUd,  we  assume  them  to  be 
(citing  cases).  We  maj^  assume  further,  in  accordance 
with  a  favorite  speculation  of  these  days,  that  pliilo- 
sophically  a  partnership  and  a  corporation  illustrate  a 
single  principle,  and  even  that  the  certificate  of  a  share 
in  one  represents  property  in  very  nearly  the  same  sense 
as  does  a  share  in  the  other.  In  either  case  the  members 
could  divide  the  assets  after  paying  the  debts.  But  from 
the  point  of  view  of  the  law,  there  is  a  very  important 

100 


Chap.  II]  RIGHTS  AND  LIABILITIES  [§  24 

difference.  The  corporation  is  legally  distinct  from  its 
members,  and  its  debts  are  not  their  debts.  Therefore, 
when  a  paid-up  share  in  a  corporation  is  taken,  no  lia- 
bility is  assumed,  apart  from  statute,  but  simply  a  right 
equal  in  value  to  a  corresponding  share  in  the  assets  and 
good- will  of  the  concern  after  the  debts  are  paid.  If 
this  right  is  worth  something  it  is  a  proper  security,  and 
if  it  is  worth  nothing  no  harm  is  done.  It  is  true  that  a 
statute  may  add  a  liability,  but  when,  as  usual,  this  is 
limited  to  the  par  value  of  the  stock,  it  has  not  been 
considered  to  affect  the  nature  of  the  share  so  funda- 
mentally as  to  prevent  a  national  bank  from  taking  it 
in  pledge,  with  qualifications,  as  it  might  take  land  or 
bonds. 

''But  to  take  a  share  by  transfer  on  the  books  means 
to  become  a  member  of  the  concern.  The  person  who 
appears  on  the  books  of  the  corporation  as  the  stock- 
holder is  the  stockholder  as  between  him  and  the  cor- 
poration and  his  rights  with  regard  to  the  corporate 
property  are  incident  to  his  position  as  such.  (Citing 
cases.)  This  does  not  matter  or  matters  less,  in  the  case 
of  a  corporation  for  the  reasons  which  we  have  stated. 
But  when  a  similar  transfer  is  made  of  a  share  in  a  part- 
nership it  means  that  the  transferer  at  once  becomes  a 
member  of  the  firm  and  goes  into  the  business  with  an 
unlimited  personal  liability,  in  short,  does  precisely 
what  a  national  bank  has  no  authority  to  do.  This  the 
Supreme  Court  of  Ohio  rightly  held  beyond  the  powers 
of  the  bank.  (Citing  cases.)  It  is  true  that  it  has  been 
held  that  a  pledgee  may  escape  liability  if  it  appears  on 
the  certificate  and  books  that  he  is  only  a  pledgee. 
(Citing  cases.)  No  doubt  the  security  might  be  real- 
ized without  the  pledgee  ever  becoming  a  member  of 

101 


§  24]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

the  firm.  It  is  not  necessary  in  this  case  to  say  that 
shares  Uke  the  present  could  not  be  accepted  as  secur- 
ity in  any  form  by  a  national  bank.  But  such  a  bank 
cannot  accept  an  absolute  transfer  of  them  to  itself. 
It  recently  has  been  decided  that  a  national  bank  can- 
not take  stock  in  a  new  speculative  corporation  with  the 
common  double  liability  in  satisfaction  of  debt.  First 
National  Bank  of  Ottawa  v.  Converse,  200  U.  S.  425. 
A  fortiori,  it  cannot  take  shares  in  a  partnership  to  the 
same  end. 

"We  are  of  opinion  that  with  the  liability  as  partners 
all  liability  falls.  The  transfer  of  the  shares  to  the 
bank  was  not  a  direct  transfer  of  a  legal  interest  in  the 
leasehold,  which  was  in  the  hands  of  trustees.  It  was 
simply  a  transfer  of  a  right  to  have  the  property  ac- 
counted for  and  to  receive  a  share  of  any  balance  left 
after  paying  debts  and  the  acquisition  of  this  right  was 
incident  solely  to  membership  in  the  firm.  If  this 
membership  failed  the  incidental  rights  failed  with  it, 
and  with  the  rights  the  liabilities  also  disappeared. 
Becoming  a  member  of  the  firm  was  a  condition  of  both 
consequences.  As  the  bank  was  not  estopped  to  deny 
that  it  was  a  partner,  it  was  not  estopped  to  deny 
all  liability  for  partnership  debts."  ^ 

A  judgment  against  one  member  merges  the  cause  of 
action  against  all  other  members  and  they  cannot  there- 
after be  sued.''  One  member  cannot  sue  another  mem- 
ber on  a  firm  transaction  at  law,^  unless  there  has  been 

»  Merchants  National  Bank  v.  Wehrmann,  202  U.  S.  295,  300,  50 
L.  (;d.  1030,  20  8.  Ct.  013  (three  judges  dissented). 

■>  United  Press  v.  Abell  Co.,  84  N.  Y.  S.  425,  87  App.  Div.  630. 

'  A  in(!inb(!r  of  a  joint  stock  coinj)any  cannot  sue  in  assumpsit  at 
law  anothcir  ineinlxT  wlio  has  takcui  possession  of  tiie  property  of  tlio 
a«sociatiori  for  its  use.     Whitcihouse  v.  Sprague,  7  Atl.  17  (Me.). 

Action  at  law  on  a  subscription  agreement  to  form  a  joint  stock 

102 


Chap.  II]  RIGHTS  AND   LIABILITIES  [§  24 

an  accounting  fixing  the  amount  due  ^  or  the  transac- 
tion has  otherwise  been  severed  from  the  mutual  obli- 

company  and  buy  a  ship.  Held:  The  plaintiffs  as  members  could  not 
sue  the  defendants  as  members  at  law.  The  only  remedy  is  in  equity 
for  an  account  as  between  partners.     MjTick  v.  Dame,  9  Cush.  248,  254. 

A  fruit  canning  association  is  described  as  a  partnership,  but  lia- 
bility of  members  is  put  upon  agency  by  direct  authority.  Action  at 
law  between  members  impossible.  Hence  member  who  took  over  debts 
and  sued  another  member  at  law  could  not  recover.  Laney  v.  Fickel, 
83  Mo.  App.  60,  63. 

Joint  stock  association  to  operate  a  water  power.  Held:  Partners. 
A  note  to  a  shareholder  endorsed  by  him  to  one  not  a  shareholder  can 
be  sued  on  at  law  (p.  676).  A  shareholder  who  has  sold  out  is  still 
liable  if  the  plaintiff  at  the  time  the  debt  was  contracted  did  not  know 
of  his  retirement  but  acted  in  reUance  on  his  membership  (p.  678). 
"A  partnership  or  joint  stock  company  is  just  as  distinct  and  palpable 
an  entity  in  the  idea  of  the  law  as  distinguished  from  the  individuals 
composing  it  as  is  a  corporation;  and  can  contract  as  an  individualized 
and  unified  party  with  an  individual  person  who  is  a  member  thereof 
as  effectually  as  a  corporation  can  contract  with  one  of  the  stock- 
holders." The  only  difference  is  a  technical  one  of  procedure  (p.  676). 
Walker  v.  Wait,  50  Vt.  668. 

Conway  v.  Zendler,  154  Wis.  479,  143  N.  W.  162.  An  assignee  of  a 
member  cannot  sue.  BuUard  v.  Kinney,  10  Cal.  60,  63  (claim  for 
goods  sold). 

A  stockholder  in  an  express  company  sued  for  loss  of  a  package. 
Under  New  York  statute  he  sued  president.  Held:  Statute  permits 
a  member  to  sue.  Since  statute  limits  remedy  to  funds  of  the  asso- 
ciation it  eUminates  the  objection  of  partnership  that  plaintiff  would 
be  suing  himself.  The  president  for  purpose  of  action  is  made  a  cor- 
poration sole.  It  is  plain  that  joint  stock  associations  organized  under 
the  statute  have  some  of  the  powers  and  privileges  of  corporations  not 
possessed  by  individuals  or  partnerships.  Westcott  v.  Fargo,  61  N.  Y. 
542,  550,  19  Am.  Rep.  300;  Ace.  Sander  v.  Edling,  13  Daly  (N.  Y.)  238; 
Fritz  V.  Muck,  62  How.  Pr.  (N.  Y.)  69;  Saltsman  v.  Schultz,  14  Hun  256. 

Action  against  members  of  an  association  (not  a  joint  stock  com- 
pany) after  judgment  against  the  association  under  the  statute.  Held: 
Defendant  may  plead  non-joinder  of  other  partners  but  must  give  their 
names.  The  fact  that  the  plaintiff  is  a  firm  some  of  whose  members 
are  also  members  of  the  defendant  association  is  no  bar  to  an  action 
at  law  since  the  distinction  between  actions  at  law  and  suits  in  equity 
is  abolished.    Kingsland  v.  Braisted,  2  Lans.  17,  20  (N.  Y.). 

One  member  of  a  mining  partnership  cannot  sue  another  at  law  until 
there  has  been  an  accounting.  On  the  death  of  the  plaintiff's  testator 
the  firm  was  not  dissolved  and  his  estate  succeeded  to  his  interest. 
Bochme  v.  Fitzgerald,  43  Mont.  226,  115  Pac.  413. 

Semble:  One  who  lends  money  to  an  association  and  later  becomes 
a  member  may  bring  an  action  at  law  on  it  though  a  partner.  Garrand 
V.  Hardey,  5  M.  &  G.  251,  477,  484. 

^  Refund  of  contributions  to  an  association  formed  to  hire  sub- 

103 


§  24]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

gations  of  the  members.^"  Within  this  rule  he  is  Uable 
at  law  for  his  agreed  contribution  to  the  capital. ^^ 
"V\'Tiether  or  not  a  subscriber  is  liable  before  the  entire 
capital  is  subscribed,  depends  on  the  interpretation  of 
the  articles  of  agreement. ^^    If  a  corporation  is  organ- 

stitutes  for  an  army  draft.  Koehler  v.  Brown,  2  Daly  (N.  Y.) 
78. 

It  is  not  clear  whether  the  following  case  belongs  in  this  note  or  as 
a  contra  case  urider  the  preceding  note.  The  point  was  not  discussed 
in  the  opinion.    Boyd  v.  Merriell,  52  111.  151,  153. 

Deceased  subscribed  with  others  an  agreement  to  organize  a  joint 
stock  company.  After  his  death  the  survivors  conveyed  to  the  plain- 
tiff aU  the  assets  of  the  company  including  the  accounts  due.  Held: 
This  was  a  partnership  and  dissolved  by  death.  There  are  no  creditors. 
The  transfer  of  accounts  receivable  could  not  be  assigned  so  as  to  enable 
the  assignee  to  sue  without  an  accounting.  Villas  v.  Farwell,  9  Wis. 
460,  462. 

^^  Written  contract  to  pay  debts  for  keep  of  a  horse  sold  defendant 
by  association.    Simpson  v.  Ritchie,  110  Me.  299,  86  Atl.  124. 

"  Member  of  stage  line  company  hable  to  its  agent  on  his  subscrip- 
tion.   Brj'^ant  v.  Goodnow,  5  Pick.  228. 

Contra.  An  unincorporated  mining  company  cannot  sue  in  the 
name  of  its  trustee  a  member  for  a  balance  of  his  subscription,  but 
must  proceed  in  equity  for  a  partnership  account.  Niven  v.  Spicker- 
man,  12  Johns.  401. 

An  agreement  to  organize  a  joint  stock  company  in  substance  bind- 
ing the  signers  to  pay  the  sum  set  after  their  names  is  in  effect  a  promise 
to  the  other  signers  to  make  the  payment  and  is  binding.  False  rep- 
resentations by  one  of  the  signers  to  the  defendant  are  not  binding  on 
the  others  and  do  not  avoid  his  subscription.  Kimmins  v.  Wilson,  8 
W.  Va.  584,  590. 

Subscriptions  to  shares  in  a  joint  stock  company  were  expressly 
made  to  trustees  for  the  association.  Held:  They  were  partners.  Or- 
dinarily the  contract  of  subscriptions  is  made  with  all  the  members 
and  the  action  would  have  to  be  by  all  of  them,  but  where  expressly 
payable  to  trustee  they  are  the  ones  to  sue.  Cross  v.  Jackson,  5  Hill 
478,  480. 

'2  A  scheme  for  sale  of  shares  in  a  real  estate  speculation  seems  to 
have  contemplated  an  association  because  the  certificate  provided  for 
majority  control  of  sales.  In  an  action  on  a  subscription,  Held:  The 
subscriber  was  liable  whether  or  not  all  the  shares  were  subscribed 
(no  discu.ssion  of  associations).  Sandford  v.  Halsey,  2  Den.  235, 
2.50.  See  Sickclsteel  v.  Edmonds,  158  Wis.  122,  136,  147  N.  W. 
1024. 

A  landowner  projected  a  joint,  stock  association  to  own  and  sell  the 
land.  Held:  On  interpretation  of  tlic  articles  of  agreement  no  sub- 
Bcribcr  was  to  be  liable  till  the  entire  capital  had  been  subscribed. 
Sanford  v.  Handy,  25  Wend.  475,  479. 

104 


Chap.  II]  RIGHTS  AND  LIABILITIES  [§  24 

ized  instead  of  an  association,  one  who  subscribed  to  an 
association  is  generally  held  not  liable  to  the  corpora- 
tion on  his  subscription.^^  When  shares  are  forfeited 
by  the  association  for  non-payment  of  subscriptions  in 
accordance  with  the  articles  of  agreement,  the  sub- 
scriber is  usually  allowed  by  the  courts  to  redeem,  if  no 
rights  of  others  have  intervened.^*  If  the  articles  im- 
pose no  penalty  for  failure  to  pay  assessments,  there 
is  no  authority  for  a  forfeiture  of  shares.^''  A  member 
may,  of  course,  bring  a  bill  in  equity  for  contribution 
to  its  debts,^^  but  not  on  a  debt  incurred  in  violation  of 

13  Knottesville  Co.  v.  Mattingly,  18  Ky.  Law  Rep.  246,  35  S.  W. 
1114;  Machias  Co.  v.  Coyle,  3.5  Me.  405. 

Because  it  is  not  assignable  to  the  corporation  and  he  does  not  be- 
come a  member  of  the  corporation  without  his  assent.  Wallingford 
Co.  V.  Fox,  12  Vt.  304,  309. 

A  joint  stock  company  was  formed  by  subscriptions  payable  to 
trustees.  Incorporation  was  contemplated  and  subsequently  carried 
out.  The  corporation  as  successor  to  trustees  sued  on  these  subscrip- 
tion promises.  Held:  Though  the  subscribers  were  partners  and  the 
trustee  was  a  co-partner  an  action  at  law  can  be  brought  on  a  partner's 
promise  to  contribute  to  the  original  capital  of  the  fii-m.  (Only  one 
decision  by  Chancellor  Kent,  Livingston  v.  Ljmch,  held  contra.)  Town- 
send  V.  Goewey,  19  Wend.  424,  427,  429. 

"  Articles  of  agreement  of  an  unincorporated  association  provided 
that  on  failm-e  to  pay  assessments  shares  should  be  forfeited,  but  no 
method  of  forfeiture  specified.  Held:  No  rights  having  intervened, 
after  such  a  forfeiture  the  shareholder  will  be  allowed  in  equity  to  re- 
deem. Suggested  that  bill  to  foreclose  was  the  only  effective  method 
under  these  articles.  Walker  v.  Ogden,  Fed.  Cas.  17081  (C.  C. — 
lU.). 

A  shareholder  in  a  voluntary  association  under  a  deed  of  trust  to 
work  a  mine  failed  to  pay  assessments  and  his  shares  were  forfeited 
under  the  provision  in  the  deed  of  trust.  Held:  "Equity  will  not  re- 
lieve against  a  forfeiture  of  stock  where  the  shareholder  has  acquiesced 
in  the  same  until  a  change  of  circumstances  or  conditions  has  arisen." 
Also  held  partnership.  Joseph  v.  Davenport,  116  la.  268,  274,  89  N.  W. 
1081. 

15  Stringham  v.  Durkee,  8  Wis.  1,  130. 

18  Henry  v.  Jackson,  37  Vt.  431  (cooperative  store);  see  §  28,  note  8, 
and  §  31,  note  11. 

Bill  by  one  shareholder  in  an  association  for  an  account  and  pay- 
ment of  subscriptions  by  those  who  had  subscribed  for  shares.  Held: 
Merely  subscribing  for  shares  does  not  constitute  the  subscriber  a 
member  of  the  association  or  partner.    It  is  merely  a  declaration  of  in- 

105 


§  24]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

the  articles  of  association.^"  If  the  company  refuses  to 
recognize  a  shareholder  he  is  entitled  to  a  decree  affirm- 
ing his  interest  and  for  an  account. ^^  The  certificate  for 
shares  in  an  association  like  the  certificate  for  shares 
in  a  corporation  is  simply  a  muniment  of  title  as  evi- 
dence of  the  ownership  of  the  share  and  the  issue  of 
the  certificate  is  not  essential  in  order  to  constitute 
membership  in  the  association."  There  are  some 
early  cases  which  refused  equitable  relief  to  members 
of  associations  for  profit  on  the  ground  that  mem- 
bers should  first  seek  rehef  \Nathin  the  organization.^" 

tention  by  the  subscriber  to  become  a  partner.  The  meeting  of  some 
of  the  subscribers  to  organize  binds  none  but  those  who  meet.  Hence 
bill  dismissed  without  prejudice  to  an  action  at  law  of  the  company  on 
the  subscription.  Appeal  of  Hedge,  63  Pa.  St.  273,  277.  See  also  Gal- 
veston City  Co.  V.  Scott,  42  Tex.  535,  553. 

On  winding  up  a  banking  partnership  with  transferable  shares  it 
appeared  that  some  former  shareholders  had  paid  judgments  recov- 
ered against  them.  They  sought  to  prove  these  claims  against  the 
estate,  btlt  claims  were  disallowed.  All  creditors  of  the  partnership  at 
date  of  dissolution  had  been  paid.  Stockdale  v.  Maginn,  207  Pa.  St. 
227,  56  Atl.  439.  See  Sickelsteel  v.  Edmonds,  158  Wis.  122,  136,  147 
N.  W.  1024. 

1^  Oil  land  association.  Articles  forbade  increase  of  capital  without 
consent  of  majority  of  shareholders.  Debt  incurred  in  borrowing 
money  to  buy  additional  land.    Crimm's  Appeal,  66  Pa.  St.  474,  477. 

**  A  shareholder  in  a  joint  stock  companj',  formed  to  construct  a 
ditch  to  supply  water  to  mines,  whom  the  company  refuses  to  recog- 
nize as  a  stockholder,  on  a  bill  in  equity  is  entitled  to  a  decree  affirm- 
ing his  interest  and  dii'ecting  an  account.  Smith  v.  Fagan,  17  Cal.  178, 
181.    See  also  Lesseps  v.  Architect  Co.,  13  La.  414. 

Bill  by  shareholder  of  an  unincorporated  association  for  accounting 
must  be  brought  for  benefit  of  himself  and  all  other  shareholders. 
Warth  V.  Raddc,  18  Abb.  Pr.  396. 

">  Ycaman  v.  Galveston  City  Co.,  167  S.  W.  710,  720  (Tex.). 

-"  Hill  for  receiver  and  winding  up  of  brewery  association.  The 
agrociment  provided  for  monthly  meetings  and  for  a  committee  to 
oversee  the  managers  and  call  mcH'tings  if  managers  misbehave.  Held: 
Will  not  take  juri.sdiction  till  i)laiiitiif  has  exhausted  remedies  within 
the  organization  (ap[)arently  apjjeal  to  tlic  committee  or  to  a  meeting) 
(p.  158).  But  intimates  that  in  an  emergency  court  might  act  when 
delinquency  clearly  made  out  (p.  159).  Carlen  v.  Drury,  1  Ves.  &  B. 
154. 

A  mutual  fire  insurance  company  was  organized  under  a  deed  pro- 
viding for  certain  officers,  auditors,  etc.    It  in  fact  neglected  to  carry 

100 


Chap.  II]  TERMINATION   OF   LIABILITY  [§  25 

This  is  apparently  on  the  analogy  of  the  rule  re- 
garding non-profit  associations  which  will  be  dis- 
cussed later.^^ 

§  25.  Termination  of  Liability 

In  the  absence  of  agreement,  a  partner  cannot  divest 
himself  of  his  connection  with  the  firm  without  the 
consent  of  his  co-partners  ^  nor  make  an  assignee  of  his 
interest  a  member  of  the  firm  without  such  consent.^ 

out  these  provisions  and  left  the  management  entirely  to  its  founder. 
Certain  members  on  behaK  of  the  whole  now  bring  a  bill  to  enjoin  him 
from  receiving  more  premiums  charging  misconduct.  Held:  Asso- 
ciation vaUd  as  long  as  membership  not  transferable,  but  court  cannot 
interfere  where  the  members  have  failed  to  carry  out  the  provisions  of 
the  deed  of  trust.  It  must  be  treated  as  a  general  partnership.  If  they 
will  not  act  on  their  deed  the  court  cannot  manage  their  affairs  for 
them.  (Hard  to  understand  unless  it  means  that  they  must  first  seek 
reUef  within  the  society.)  Ellison  v.  Bignold,  2  Jacob  &  Walker  503, 
512. 

Theatre  Association.  Shareholders  right  to  seats.  The  court  will 
not  interfere  to  enforce  duties  which  are  properly  subject  of  internal 
regulation  (p.  423).  Power  to  manage  business  conferred  on  board  of 
directors  includes  power  to  remit  rent  (p.  419).  Treated  as  partners 
throughout.     Fareu-a's  Appeal,  3  Walk.  416  (Pa.). 

An  association  was  formed  by  subscriptions  to  build  a  high  school. 
It  is  not  clear  whether  it  was  a  coi-poration  or  not.  The  building  was 
built  and  shares  were  issued.  The  holder  of  nearly  all  the  shares  re- 
paired the  building  and  was  about  to  move  it  off.  Held:  Remaining 
shareholders  may  have  a  temporary  injunction.  Action  by  association 
not  a  requisite  preliminary  because  defendant  controls  stock.  Asso- 
ciation should  be  made  party.    Marston  v.  Dm-gin,  54  N.  H.  347,  374. 

21  See  §  58. 

1  Strang  v.  Osborne,  42  Cal.  187,  94  Pac.  320  (mining  irrigation  ditch 
association.  The  opinion  sometimes  talks  as  though  the  members  were 
merely  tenants  in  common);  Stimson  v.  Lewis,  36  Vt.  91,  95,  98  (co- 
operative store).    Contra,  Norwood  v.  Francis,  25  App.  D.  C.  463,  471. 

A  charge  that  if  a  member  of  a  banking  association  notified  the  bank 
to  transfer  his  stock  to  another  and  the  bank  dechned  to  do  it  and  he 
thereafter  acted  as  director  and  voted  by  proxy  at  stockholders'  meet- 
ing he  was  still  hable  to  creditors  as  a  partner  was  correct.  So  if  he 
was  held  out  as  a  director  to  his  knowledge.  Bradford  v.  National 
Benefit  Ass'n,  26  App.  D.  C.  268,  273. 

2  Stimson  v.  Lewis,  36  Vt.  91,  95,  98. 

An  association  was  formed  to  prosecute  a  voyage  to  California  and 
carry  on  business  there.     Constitution  prohibited  any  member  from 

107 


§  25]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

But  in  associations  for  profit  the  consent  is  given  in  ad- 
vance and  provision  for  transferable  shares  is  almost 
always  made.^  Assignees  of  shares  are  not  subject  to 
claims  the  association  may  have  against  their  as- 
signors.^ 

A  general  assignment  by  a  shareholder  is  a  with- 
drawal where  shares  are  transferable.^  But  where  the 
articles  of  association  provide  a  special  method  for 
transfer  of  shares,  that  method  must  be  followed.^ 
Transfer  of  shares  that  have  been  recognized  by  the 
association  are  valid  though  not  carried  out  according 

withdrawing  without  the  consent  of  the  majority  and  declared  penalty 
of  forfeiture  of  his  share  for  such  withdrawal.  Shares  also  made  trans- 
ferable by  endorsement  on  the  certificate.  In  an  action  bj^  a  shareholder 
against  the  president  for  a  share  in  the  profits,  Held:  Since  the  con- 
stitution provided  for  a  president  and  directors  who  should  have  ex- 
clusive direction  of  all  concerns  of  the  company,  "it  became  rather  a 
joint  stock  company  than  a  proper  co-partnership.  If  they  had  been 
co-partners,  each  individual  could  have  disposed  of  the  whole  property, 
inciu-red  habiUties  and  made  piu'chases."  Though  he  allowed  an  out- 
sider to  represent  his  share  for  a  time,  plaintiff  had  no  power  to  intro- 
duce him  as  a  member.  Hence  the  acts  of  this  pai'ty  could  not  forfeit 
plaintiff's  share.    Cox  v.  Bodfish,  35  Me.  302,  306. 

^  The  peculiar  characteristic  of  joint  stock  companies,  as  distinx 
guished  from  partnerships,  is  the  right  of  the  holder  of  any  interest  in 
it,  whether  gi'eat  or  small,  to  transfer  it  to  a  stranger  without  the  con- 
sent of  his  co-owners.  Cincinnati  Co.  v.  Citizens'  Bank,  11  Ohio  Dec. 
.50. 

''  Shareholder  in  an  association  cannot  object  to  the  right  of  another 
shareholder  to  receive  a  dividend  on  the  ground  that  the  transfer  to 
him  was  without  authority  and  that  the  shares  were  subject  to  a  claim 
of  the  as.sociation  against  a  former  holder  when  the  present  holder  took 
for  value  and  without  notice  and  the  trustees  for  the  shareholders  made 
the  transfer  on  their  books  without  objection.  Cohen  v.  Gw^ynn,  4 
Md.  Ch.  357,  3G2. 

Holders  of  sliares  in  a  joint  stock  land  company  are  not  subject  to 
any  set-off  wliich  the  association  has  against  the  Jissignors  (p.  320). 
Agent  unlike  a  partner  is  entitled  to  claim  compensation  for  serv- 
ices (p.  327).  Possibly  it  was  incoi-porated  (p.  321).  Spence  v. 
Whitaker,  3  Port  297  (Ala.). 

'  Swoope  V.  Wakefi(!ld,  10  Pa.  Super.  Ct.  342,  351  (cooperative 
store). 

'  Robbins  v.  Butler,  24  111.  387,  426.  At  least  as  between  the  mem- 
bers. Wadsworth  v.  J:)uncHn,  164  111.  360,  362,  45  N.  E.  132;  Harper 
V.  ItuynioiKl,  3  Bosw.  2'J,  39  (X.  Y.). 

108 


Chap.  II]  TERMINATION   OF   LIABILITY  [§  25 

to  its  rules. '^  A  member  who  sold  his  shares  was  al- 
lowed to  sue  for  the  purchase  price  though  he  had  not 
transferred  it  in  the  way  required  by  the  deed  of 
trust.  ^ 

New  shareholders  are  not  liable  for  preexisting  debts 
unless  they  assume  them  expressly  or  impliedly.^ 
Those  who  were  members  at  the  time  a  contract  was 
made  are  liable  to  the  creditors  upon  it  ^°  and  dissolu- 

7  Rianhard  v.  Hovey,  13  Ohio  300,  302. 

On  a  shareholder's  bill  for  winding  up  a  joint  stock  company  which 
was  insolvent  the  plaintiffs  tried  to  bring  in  former  shareholders  on  the 
ground  that  the  transfer  of  their  shares  had  not  been  carried  out  as 
provided  in  the  by-laws.  Held:  Since  the  transferees  had  been  rec- 
ognized as  partners  by  the  plaintiffs  they  cannot  now  set  up  informal- 
ity in  the  transfer  (p.  446).  Equity  would  at  any  time  have  compelled 
a  transfer  and  have  compelled  payment  of  dividends  declared  (p.  447). 
The  fact  that  some  of  the  plaintiffs  have  paid  debts  of  the  association 
does  not  put  them  in  a  better  position.  Doubtful  if  creditors  with 
notice  could  complain  (p.  448).    Wells  v.  Wilson,  3  Ohio  425. 

8  Alvord  V.  Smith,  5  Pick.  232,  235. 

3  M.  W.  Powell  Co.  V.  Finn,  198  111.  567,  64  N.  E.  1036;  Beaman  v. 
Whitney,  20  Me.  413,  420;  Fuller  v.  Rowe,  57  N.  Y.  23,  26;  Shamburg 
V.  Ruggles,  83  Pa.  St.  148;  BarndoUar  v.  Du  Bois,  142  Pa.  St.  565,  21 
Atl.  988;  Thomas  v.  Clark,  IS  C.  B.  662. 

Issue  whether  shareholders  in  an  unincorporated  association  were 
liable  for  loans  made  by  the  plaintiff  before  they  received  their  cer- 
tificates. In  a  very  loose  charge  to  the  jury  the  court  said  that  they 
were  not  liable  as  partners  for  preexisting  debts  unless  they  accepted 
certificates  with  a  knowledge  of  existing  conditions  that  would  amount 
to  assumption  of  debts.  National  Park  Bank  v.  Nichols,  Fed.  Cas. 
10047  (C.  C.  —  111.). 

10  Wadsworth  v.  Duncan,  164  111.  360,  365,  45  N.  E.  132  (bank); 
Moore  v.  May,  117  Wis.  192,  204,  94  N.  W.  45  (cooperative  store). 

On  a  shareholder's  bill  for  specific  performance  of  a  contract  to  con- 
vey land  to  an  unincorporated  association  the  question  of  the  com- 
petency of  witnesses  under  the  old  law  arose.  Held :  Shareholders  were 
liable  as  partners  until  transfer  of  their  shares  had  been  recorded  on 
the  books  of  the  association  as  requu'ed  in  the  articles  of  association. 
Robbins  v.  Butler,  24  111.  387, 426.  But  not  where  the  transfers  had  been 
recognized  by  the  association  though  not  carried  out  according  to  its 
rules.    Rianhard  v.  Hovey,  13  Ohio  300,  312. 

In  this  connection  the  following  case  is  of  interest.  A  bond  for  a 
deed  in  an  unincorporated  association  is  void,  for  not  being  a  corpora- 
tion it  could  not  so  contract.  To  have  been  vahd  against  the  associa- 
tion it  should  have  been  executed  by  all  the  individual  members  either 
personally  or  by  agent.    Vattier  v.  Roberts,  2  Black.  255  (Ind.). 

109 


§  25]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

tion  does  not  terminate  liability  on  existing  contracts. ^^ 
A  defendant  is  liable  to  one  who  dealt  with  the  associ- 
ation while  he  was  a  member  on  contracts  made  before 
the  plaintiff  had  notice  of  the  defendant's  withdrawal. ^^ 
A  shareholder  in  a  formal  association  for  profit,  how- 
ever, in  most  cases  would  prove  to  have  been  a  dormant 
partner  who  is  not  bound,  in  order  to  avoid  liability  on 
future  contracts,  to  give  notice  of  dissolution  to  those 
who  have  dealt  with  the  firm  while  he  was  a  member. ^^ 

"  "An  association  of  this  kind  (insurance)  cannot  go  out  of  exist- 
ence while  its  contracts  and  obhgations  are  outstanding."  Camden, 
etc.  R.  R.  V.  Pennsylvania  Guarantors,  59  N.  J.  L.  328,  35  Atl.  796; 
Burgan  v.  LyeU,  2  Mich.  102  (mining  partnership,  but  the  distinction 
usually  made  between  such  partnerships  and  ordinary  partnerships 
was  not  noticed). 

12  Grady  v.  Robinson,  28  Ala.  289,  297  (bank) ;  Pettis  v.  Atkins,  60 
lU.  454,  457;  McDowell  v.  Joice,  149  111.  124,  137,  36  N.  E.  1012  (land 
speculation);  Tyi-rell  v.  Washburn,  6  Allen  466  (cooperative  store); 
Farnham  v.  Patch,  60  N.  H.  294,  326;  N.  Y.  Bank  v.  Crowell,  177  Pa. 
St.  313,  35  Atl.  613;  Tenney  v.  N.  E.  Protective  Union,  37  Vt.  64,  68 
(cooperative  store). 

Cannot  hold  him  on  contracts  made  after  knowledge  of  withdrawal. 
Bank  depositor.    Wadsworth  v.  Duncan,  164  111.  360,  45  N.  E.  132. 

Plaintiff  must  have  known  of  his  former  membership.  Bank.  Nor- 
wood V.  Francis,  25  App.  D.  C.  463,  472. 

A  member  of  a  mining  partnership  sold  his  share.  Held :  He  is  not 
liable  to  employees  hired  subsequently  or  to  prior  employees  who  con- 
tinued work  with  loiowledge  of  the  sale  or  of  such  facts  and  circumstances 
as  were  sufficient  to  have  put  a  reasonably  prudent  person  on  inquiry  as 
to  the  sale.  But  he  is  liable  to  former  employees  who  continued  to  work 
without  notice.  Kelley  v.  M'Namee,  164  Fed.  369,  375  (C.  C.  A.  — 
Ala.ska). 

Member  of  a  mining  partnership  like  any  other  is  liable  after  dissolu- 
tion for  new  debts  to  prior  creditors  if  he  docs  not  give  them  personal 
notice  of  retirement.  So  when  the  firm  transferred  to  a  corporation, 
recording  the  deed  was  not  notice.  Dcllapiazza  v.  Foley,  112  Cal.  380, 
384,  44  Pac.  727. 

Tenants  in  common  of  a  mine  employed  defendant  to  work  it  for 
them.  After  a  time  plaintiff  notified  the  other  owners  and  the  defend- 
ant that  he.  would  not  thereafter  empk)y  defendant.  Plaintiff  brings 
an  action  for  a  share  in  the  jiroceeds  of  the  mine  in  the  hands  of  the 
deferirlant.  Held:  I'laintiff's  notice;  amounted  to  a  termination  of  the 
I)artri(THliip  and  tlien^aftcr  i)laintiff  was  not  liable  for  defendant's 
salary  and  defendant  could  not  withhold  it  from  the  proceeds  of  the 
mine  in  lii.s  jHw.se.ssion.    Slater  v.  Haas,  15  Col.  574,  25  Pac.  1089. 

'*  GroHvenor  v.  Lloyd,  1  Met.  19. 

no 


Chap.  II]  DISSOLUTION   BY  TRANSFER  [§  26 

It  has  been  held  that  the  shareholders  at  the  time 
action  is  brought,  not  those  who  had  been  share- 
holders when  the  contract  was  made,  are  the  ones  en- 
titled to  sue  upon  it.^"*  In  litigation  between  members 
an  agreement  that  retiring  members  cease  to  be  liable 
for  debts  and  that  incoming  members  are  liable  for 
outstanding  debts  should  be  enforced. ^^ 

§  26.  Dissolution  by  Transfer 

Transfer  of  a  share  may  be  held  technically  to  dis- 
solve the  association,^  but  subject  to  the  implied  agree- 

"  Members  of  an  unincorporated  association  with  transferable 
shares  sued  an  agent  for  money  withheld.  It  was  objected  that  one 
of  the  plaintiffs  acquired  his  share  by  transfer.  Held:  "The  implied 
promise  of  one  holding  money  for  such  an  association  must  be  under- 
stood to  be  to  make  payment  to  those  who  are  associates  when  the 
suit  is  brought."     Willson  v.  Oliver,  30  Mich.  474. 

1^  In  winding  up  the  Home  Grocery  Co.,  the  manager  who  had 
advanced  money  previously  to  pay  debts  of  the  association  claimed 
reimbursement  from  the  other  members.  Held:  He  did  not  have  to 
make  defendants  certain  persons  who  had  withdrawn  according  to  the 
articles  of  association,  though  they  were  members  when  the  claim 
arose.  There  was  no  specific  stipulation  in  the  articles  about  Hability 
of  withdrawing  members  for  existing  debts,  but  court  i-eached  the  re- 
sult by  an  interpretation  of  the  agreement.  EngvaU  v.  Buchie,  73 
Wash.  534,  132  Pac.  231. 

Such  an  agreement  seems  to  have  been  imphed  from  the  fact  that 
the  shares  were  transferable  m  Smith  v.  Virgin,  33  Me.  148,  156. 

Shareholders  in  an  association  or  continuing  partnership  with  trans- 
ferable shares  have  no  equity  to  compel  former  shareholders  whose 
transferees  have  been  accepted  in  their  places  by  the  plaintiffs  to  con- 
tribute to  the  payment  of  debts  of  the  association  incurred  before  their 
transfer  of  shares.  They  are  liable  only  secondarily  for  such  debts, 
the  present  shareholders  being  primarily  liable.  Savage  v.  Putnam,  32 
N.  Y.  501,  506. 

^  Lord  Eldon  suggested  that  unless  the  contrary  was  provided  in 
the  articles,  a  retiring  member  would  have  to  notify  all  other  share- 
holders before  a  dissolution  resulted.  Van  Sandau  v.  Moore,  1  Russ. 
441,  463.  But  the  ordinary  provision  for  transfer  of  shares  would 
doubtless  have  satisfied  him.  Lindley  says  transfer  results  in  a  new 
firm.  Lind.  Part  7th  Eng.  Ed.,  p.  401.  Ace.  McDowell  v.  Joice,  149 
lU.  124,  135,  36  N.  E.  1012. 

An  unincorporated  bank  failed.  A  depositor  sued  certain  share- 
holders.   Defendants  pleaded  non-joinder  of  various  shareholders  who 

111 


§  26]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

ment  of  the  other  members  to  continue  as  partners, 
so  that  the  others  who  have  not  transferred  their 
shares  cannot  escape  future  HabiUty  on  that  ground. 
Most  courts,  however,  have  held  that  transfer  of  a 
share  in  an  unincorporated  association  with  transfer- 
able shares  does  not  dissolve  the  partnership. 

The  defendant,  a  corporation  (which  could  not  hold 
the  real  estate  in  question  legally)  organized  the  Ottawa 
Development  Syndicate  to  buy  land  to  give  to  facto- 
ries and  sell  to  raise  cash  to  give  to  other  factories.  At 
a  public  meeting  the  syndicate  was  formed  by  subscrip- 
tions to  an  agreement  of  certain  sums  for  certain  pur- 
had  previously  sold  their  shares  to  the  association  or  to  other  share- 
holders and  also  brought  a  bill  in  equity  for  dissolution  and  receiver 
making  the  other  members  defendants.  In  only  one  case  had  the 
shareholders  selling  out  had  theh'  transfer  made  on  the  books  of  the 
company  as  provided  in  its  articles.  Held:  Members  are  partners 
and  hable  for  debts  of  association  unless  they  shifted  habihty  in  the 
very  manner  provided  by  the  articles  of  association  (p.  362).  As  be- 
tween members  a  different  rule  would  prevail  from  that  as  against 
third  persons.  After  a  sale,  the  remaining  members  tacitly  formed  a 
new  partnership  (p.  363).  As  between  the  remaining  partners  a  new 
firm  and  implied  assumption  of  debts  (p.  364).  If  a  depositor  knew  of 
change  in  membership,  acquiesced  in  it  and  made  other  deposits,  he 
could  not  hold  the  retiring  member  even  though  the  transfer  was  not 
strictly  according  to  rules  of  association  (p.  364).  A  depositor  with 
notice  who  are  shareholders  could  hold  all  who  were  shareholders  when 
he  made  his  deposit  (p.  365).  Continuing  partners  have  no  right  to 
require  that  retiring  partners  be  made  defendants  (p.  365).  Wads- 
worth  V.  Duncan,  164  111.  360,  45  N.  E.  132.  But  see  Hossack  v.  Dev. 
Ass'n,  244  111.  274,  91  N.  E.  439. 

An  unincorporated  bank  with  provision  for  transfer  of  shares. 
Held:  After  such  transfer  the  continuance  of  the  business  without  in- 
terruption does  not  vai-y  the  gcmeral  rule  that  a  transfer  of  a  share  in  a 
firm  is  a  dissolution  and  the  new  firm  is  not  liable  for  the  debts  of  the 
old  nor  do  tiio  creditors  have  any  liens  on  the  assets  of  the  old.  Mead- 
ville  Sav.  Bank  Estate,  2  Pa.  Super.  Ct.  618,  645. 

A  bill  by  shareholders  in  a  scythe  manufacturing  company  for 
contribution  and  winding  up.  Hekl :  A  sale  of  his  interest  in  the 
property  of  the  company  by  tlie  majority  shareholdon*  is  a  dissolu- 
tion. It  was  not  a  sale  of  sliares.  Since  this  association  had  trans- 
ferable shares,  those  who  W(;re  shareholders  at  the  time  of  dissolu- 
tion are  the  ones  who  are  iiabh;  for  its  debts.  Smith  v.  Virgin,  33 
Me.  148,  156. 

112 


Chap.  II]  DISSOLUTION   BY  TRANSFER  [§  26 

poses  stipulating  that  for  each  subscription  was  to  be 
issued  certificates  in  equal  amounts  of  preferred  and 
common  stock,  preferred  to  be  exchanged  for  lots  of 
like  value  and  common  ''to  represent  the  interest  of 
the  holder  in  the  proceeds  and  profits  of  the  undertak- 
ing, both  of  said  certificates  to  be  transferable."  Title 
to  the  land  was  to  be  taken  in  name  of  the  trustee.  It 
was  agreed  that  the  defendant  should  ''have  full  and 
exclusive  management  and  control  of  said  lands  and  of 
the  action  of  the  trustee  in  regard  thereto  and  of  all 
business  connected  with  the  undertaking."  The  plan 
was  executed  and  the  plaintiff  was  the  holder  of  many 
shares  of  both  kinds,  but  the  rest  of  the  preferred  share- 
holders had  exchanged  shares  for  land.  The  common 
certificate  recited  that  it  only  entitled  the  holder  to  his 
proportion  of  any  proceeds  or  profits  of  the  undertaking. 
On  a  bill  for  the  winding  up  of  the  association  and  sale 
of  the  remaining  lands  asking  to  set  aside  certain  con- 
veyances and  alleging  mismanagement,  the  court  held 
that  the  subscribers  in  many  respects  should  be  held 
partners.  "The  legal  status  of  unincorporated  socie- 
ties and  voluntary  associations  has  not  been  very  sat- 
isfactorily determined  on  many  points.  While  the 
courts  will  generally  treat  the  members  as  ordinary 
partners  and  the  associations  as  partnerships,  they  will, 
as  far  as  possible,  give  effect  to  the  articles  of  associa- 
tion or  agreement  among  the  members  themselves 
when  they  themselves  are  the  only  ones  interested.  If 
such  an  association  be  organized  for  pecuniary  profit 
so  far  as  the  rights  of  third  persons  and  liabilities  of 
the  members  to  strangers  are  concerned,  such  associa- 
tion is  usually  considered  as  a  partnership.  .  .  .  This 
syndicate  agreement  made  the  subscribers  substan- 

113 


§  26]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

tially  a  stock  company.  There  is  nothing  illegal  in  such 
an  agreement  with  transferable  shares.  The  transfer- 
ability of  the  shares  makes  such  an  association  different, 
not  merely  in  magnitude  but  in  other  ways,  from  ordi- 
nary partnerships  because  the  association  is  not  based 
upon  mutual  trust  and  confidence  in  the  skill,  knowl- 
edge and  integrity  of  the  partners.  The  sale  of  shares 
by  a  member,  the  shares  being  transferable,  is  not  a 
dissolution,  and  the  death  of  a  member  is  not  a  dis- 
solution. That  the  shares  are  transferable  is  evidence 
of  the  intent  that  such  death  or  transfer  shall  not 
result  in  a  dissolution."  ^ 

In  another  case  the  plaintiff  sued  for  goods  sold  a 
cooperative  store  of  which  the  defendant  had  been  a 
member.  He  had  moved  out  of  town  in  1859,  giving 
no  notice  of  withdrawal  from  the  association  to  the 
plaintiff  or  his  associates.  In  1860  another  member  had 
died  and  the  defendant  claimed  that  this  dissolved  the 
association  and  that  he  was  not  liable  for  goods  sold 
thereafter.  It  was  held  that  the  defendant  was  liable. 
Even  if  as  between  himself  and  his  associates  he  was 
not  a  member,  the  plaintiffs  having  dealt  with  the  asso- 
ciation while  he  was  a  member  were  entitled  to  treat 
him  as  such  till  they  received  notice  of  withdrawal. 
The  court  said  that  it  was  not  necessary  to  decide 
whether  the  association  was  strictly  a  partnership  or  not, 
since  it  is  found  as  a  fact  that  it  was  intended  to  have 
perpetuity  and  not  to  be  dissolved  by  death  or  with- 
drawal of  any  member.  "Hence,  neither  the  death  or 
withdrawal  of  any  member  would  affect  the  liability 

2  Tli(!  court  furtluT  held  t.liat  it  could  not  require  dissolution  at 
any  time,  bc>c;aus(!  it  could  not  cant^el  the  partnershij)  agreement  con- 
trary U)  its  terniH  and  it  was  evident  that  there  was  no  definite  time  for 
clo.sinK  the  Hyndicate.  Ilossack  v.  Development  Ass'n,  244  111.  274, 
2*H,  202,  01  N.  E.  439. 

HI 


Chap.  II]  DISSOLUTION   BY  TRANSFER  [§  26 

of  those  who  continued  to  be  members  for  debts  con- 
tracted in  the  name  and  for  the  benefit  of  the  asso- 
ciation." ^ 

One  well-established  exception  to  the  general  rule  of 
dissolution  of  a  partnership  by  transfer  of  a  share  is 
that  applied  in  the  case  of  mining  partnerships.  At 
an  early  date  mines  were  operated  by  joint  stock  com- 
panies to  which  the  courts  said  the  rule  of  delectus  per- 

3  Tenney  v.  New  England  Protective  Union,  37  Vt.  64,  68. 

Transfer  of  share  does  not  effect  a  dissolution.  Carter  v.  McClure, 
98  Tenn.  109,  116,  38  S.  W.  585  (cooperative  store). 

Three  persons  signed  articles  forming  an  association  to  pubhsh 
New  York  Times.  The  capital  and  assets  were  divided  into  shares.  It 
was  stipulated  that  shares  might  be  sold  after  being  offered  to  the  asso- 
ciation but  that  purchaser  could  not  participate  in  affairs  of  associa- 
tion, and  until  new  certificate  was  issued  to  him  should  have  no  right  in 
profits,  and  even  after  that  should  have  no  voice  in  conduct  of  business 
but  only  the  right  to  receive  the  share  in  profits  allotted  to  him.  Held: 
Agreement  contemplates  no  dissolution  or  sale.  Vendor  still  to  remain 
partner  as  to  management.  Because  not  first  tendered  to  the  asso- 
ciation the  sale  was  not  valid  as  between  association  and  vendor  or 
vendee,  though  valid  as  between  them.  Vendee  would  have  to  get 
power  of  attorney  from  vendor  to  get  the  profits.  On  the  dissolution 
of  the  association  this  limitation  ceased  and  the  trustees  in  Uquidation 
are  under  obhgation  to  vendee  of  the  shares.  Harper  v.  Raymond,  3 
Bosw.  (N.  Y.)  29,  39. 

Association  of  owners  of  mill  privileges  to  build  a  reservoir  formed 
under  a  statute.  Held:  Withdrawal  did  not  effect  a  dissolution.  Could 
withdraw  only  as  specified  in  the  articles.  Troy  Iron,  etc.  Factory  v. 
Corning,  45  Barb.  (N.  Y.)  231,  243. 

Held:  No  dissolution  where  articles  of  partnership  permit  transfer 
of  shares  but  rights  of  third  parties  not  affected.  Merrick  v.  Brainerd, 
38  Barb.  574,  578. 

A  land  syndicate.  Heirs  of  deceased  shareholder  brought  petition 
for  partition  of  the  land  held  by  the  trustees.  Held:  Have  no  interest 
in  the  property,  only  in  the  profits.  If  a  partnership,  it  is  not  terminated 
by  death  or  transfer  of  shares,  for  delectus  personae  was  unimportant 
consideration.  Horner  v.  Meyers,  29  Ohio  Weekly  Law  Bulletin 
403. 

By-laws  of  a  cooperative  partnership  association  provide  for  with- 
drawal of  old  and  reception  of  new  members.  A  general  assignment 
by  a  shareholder  is  such  a  withdrawal  and  purchaser  at  assignee's 
sale  gets  only  vendor's  rights  as  a  withdrawing  member.  Though  ordi- 
narily a  partner's  withdrawal  effects  a  dissolution,  this  may  be  modified 
by  articles  and  was  here.  Swoope  v.  Wakefield,  10  Pa.  Super.  Ct. 
342,  351,  44  Weekly  N.  C.  (Pa.)  209. 

115 


§  26]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

sonae  did  not  apply.^  This  doctrine  has  been  devel- 
oped into  the  modern  law  of  mining  partnerships,  as 
previously  noted,^  in  which  it  is  well  settled  that  trans- 
fer of  a  share  whether  inter  vivos  or  on  death  or  bank- 
ruptcy of  the  shareholder  does  not  work  a  dissolution. 
As  was  said  by  Judge  Field,  ''Associations  for  working 
mines  are  generally  composed  of  a  greater  number  of 
persons  than  ordinary  trading  partnerships,  and  it  was 
early  seen  that  the  continuous  working  of  a  mine,  which 
is  essential  to  its  successful  development,  would  be  im- 
possible or  at  least  attended  with  great  difficulties,  if 
an  association  was  to  be  dissolved  by  the  death  or 
bankruptcy  of  one  of  its  members  or  the  assignment  of 
his  interest.  A  different  rule  from  that  which  governs 
the  relations  of  members  of  a  trading  partnership  to 
each  other  was,  therefore,  recognized  as  applicable  to 
the  relation  to  each  other  of  members  of  a  mining  asso- 
ciation. The  delectus  personae  which  is  essential  to 
constitute  an  ordinary  partnership  has  no  place  in 
these  mining  associations."*^    It  is  suggested  that  this 

*  Leach,  M.R. :  "It  is  true  that  a  mining  concern  differs  in  some 
particulars  from  a  common  partnership  —  the  shares  are  assignable 
and  the  death  or  bankruptcy  of  the  holder  of  shares  does  not  operate 
as  a  dissolution  —  but  it  has  been  repeatedly  held  to  be  in  the  nature 
of  a  trading  concern."    Fereday  v.  Wightwick,  1  Russ.  &  M.  45,  49. 

6  See  §  7  and  §  22,  notes  2  and  3. 

6  Kahn  v.  Smelting  Co.,  102  U.  S.  641,  G45,  26  L.  ed.  266;  see 
ace.  Kimberly  v.  Arms,  129  U.  S.  512,  32  L.  ed.  764,  9  S.  Ct.  355;  Loy 
V.  Alston,  172  Fed.  90,  92  (C.  C.  A.  —  Mo.). 

"One  member  of  a  mining  partnership  has  the  right  without  con- 
sulting his  associates  to  sell  his  interest  to  a  stranger."  "There  is 
no  relation  of  trust  or  confidcmce  l)etwcen  mining  partners  which  is 
violated  by  the  sale  and  assignment  by  one  partner  to  a  stranger  or  to 
one  of  the  associates,  of  his  share  in  the  pi-ojierty  and  business  of  the 
association."  Hence  a  partner  has  no  right  to  share  in  the  purchase 
by  another  partner  of  the  shares  of  a  third.  Bissell  v.  Foss,  114  U.  S. 
252,  261,  29  L.  ed.  126,  5  S.  Ct.  851. 

"Such  is  the  uncc^rtainty  of  mining  operations  that  few  are  willing 
to  risk  all  their  rncians  in  such  undt^rtakings;  and  it  is  therefore  cus- 
tomary for  a  number  of  persons  to  unite  in  the  enterprise;  and  often 

116 


Chap.  II]  DISSOLUTION   BY   TRANSFER  [§  2G 

doctrine  has  no  peculiar  relation  to  the  business  of 
mining,  but  is  generally  applicable  to  partnership  asso- 

the  interests  owned  by  each  differ  greatly  in  amount  according  as  each 
is  able  to  furnish  means,  or  is  wiHing  to  take  the  risk.  As  a  general 
rule  it  is  impracticable  for  each  proprietor  to  work  his  interest  in  the 
mine  separate  from  the  others;  hence  arises  the  necessity  for  an  organ- 
ization of  some  kind  to  work  the  mine  such  as  a  coi-poration,  joint 
stock  company  or  mining  partnership.  The  company  in  the  present 
case  is  one  of  the  latter  class.  As  each  owner  has  a  right  to  sell  and 
convey  his  interest  at  any  time,  and  as  in  ordinary  partnerships  such 
sale  would  dissolve  the  partnership  and  compel  a  winding  up  and  set- 
tlement of  the  business  which  would  be  most  disastrous  to  a  mining 
enterprise,  it  has  become  an  established  principle  that  such  sale  does 
not  dissolve  a  mining  partnership  but  it  continues  as  before.  Such  a 
radical  change  in  the  law  of  partnership  necessitates  other  changes. 
One  result  is  that  new  members  are  thus  introduced  into  the  company 
without  the  consent  and  often  against  the  wishes  of  the  other  mem- 
bers; and  it  would  be  most  unjust  to  subject  each  proprietor  to  per- 
sonal habihties  which  might  sweep  away  all  his  property,  created 
against  his  consent  by  those  who  became  members  against  his  wishes. 
Hence  arises  the  necessity  of  establishing  new  rules  for  such  partner- 
ships differing  from  those  regulating  ordinary  partnerships,  especially 
those  relating  to  the  power  of  one  member  or  a  majority  of  the  mem- ' 
bers,  or  of  the  superintendent  or  managing  agent  to  make  contracts 
binding  upon  the  company  or  its  members  and  also  regulating  the 
extent  and  nature  of  the  hability  of  each  proprietor  for  the  company 
debts  as  between  themselves  and  third  persons."  Hence  managing 
agent  did  not  have  power  to  bind  members  on  a  note  given  for  lumber 
for  the  mine.     SkiUman  v.  Lachman,  23  Cal.  198,  206. 

Bill  for  dissolution  and  accounting  of  a  mining  partnership  and 
conveyance  of  share  in  the  mine.  Held:  Mining  partnerships  com- 
bine some  of  the  incidents  of  tenancies  in  common,  —  a  species  of 
quahfied  partnership  (p.  495).  Plaintiff  entitled  to  reUef  whether 
called  partnership  or  not  (p.  496).    Settembre  v.  Putnam,  30  Cal.  490. 

Ace.  with  Field's  statement  (p.  48).  Here  the  partnership  was  in 
working  the  mine,  the  title  to  the  mine  not  being  contributed  as 
capital  but  being  held  as  tenants  in  common  (p.  49).  As  between 
the  partners,  the  incoming  partner  is  not  Uable  for  prior  firm  debts 
(p.  51).  Majority  rule  (p.  52).  Patrick  v.  Weston,  22  Col.  45,  43 
Pac.  446. 

Elaborate  dictum  on  mining  partnerships  begins  on  page  350.  Rule 
as  to  transferable  shares  and  limited  authority  (p.  353).  Otherwise 
the  general  rules  of  partnership  apply  and  so  as  to  real  estate  (p.  367). 
What  is  partnership  property  may  be  proved  by  parol  regardless  of 
the  statute  of  frauds  (p.  358).  Meagher  v.  Reed,  14  Col.  335,  24  Pac. 
681. 

An  assignment  by  a  mining  partner  of  his  interest  in  the  metals  and 
ores  that  might  be  acquired  as  his  share  in  the  company  did  not  trans- 
fer his  share  and  did  not  make  the  transferees  partners.  Phillips  v. 
Jones,  20  Mo.  67,  69. 

*117 


§  27]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

ciations  with,  transferable  shares.  This  is  shown  by  the 
decisions  that  hold  a  mining  partnership  may  be  organ- 
ized on  the  principle  of  delectus  peisonae  and  be  subject 
to  the  ordinary  rules  of  partnership.'  The  Massachu- 
setts court  has  not  expressly  said  whether  transfer  of  a 
share  effects  a  dissolution  or  not,  but  has  said  that 
transferabihty  of  shares  is  legal.  ^ 

§  27.  Dissolution  by  Death 

Does  death  dissolve  an  association  for  profit?  Tech- 
nically, it  may  be  a  new  association  after  the  death  of 
each  member,  but  by  joining  the  association  there  is 
an  impUed  agreement  to  continue  in  each  new  associa- 
tion thus  formed,^  or,  as  has  been  said,  less  evidence  of 

"  The  agreement  of  partners  to  work  a  mine  may  be  a  contract  of 
partnership  in  the  ordinary  sense,  with  all  the  usual  limitations, 
including  the  delectus  personae.  Decker  v.  Howell,  42  Cal.  636, 
642. 

"WTiere  in  a  partnership  the  delectus  persojiae  exists  and  the  par- 
ties intend  that  the  confidential  relations  of  partners  shall  exist  and  so 
treat  the  business  relation,  the  mere  fact  that  the  business  engaged 
in  is  the  operation  of  a  mine  should  not  alter  the  habihtj'  of  the  indi- 
vidual partners."  Dailey  v.  Fitzgerald,  17  N.  M.  137,  125  Pac.  625, 
631. 

A  mining  partnership  may  be  formed  in  two  ways:  (1)  By  opera- 
tion of  law  where  there  is  no  partnership  agreement  but  cooperation 
by  co-o\s'ners  in  the  working  of  mining  property.  (2)  By  agreement  of 
the  co-owners.  In  the  former  there  is  no  delectus  personae.  In  the 
latter  there  is.  Here  it  was  a  commercial  partnership  and  sale  of  an 
interest  worked  a  dissolution.  Freeman  v.  Hemenway,  75  Mo.  App. 
611,  616. 

An  agreement  of  three  tenants  in  common  of  a  mine  "to  mine  and 
operate  said  mining  property  as  a  company"  created  a  partnersliip 
(p.  655).  No  one  can  become  a  member  of  a  firm  without  the  knowl- 
edge and  consent  of  all  the  partners  (p.  654).  Bybee  v.  Hawkett,  12 
Fed.  049  (C.  C.  —  Ore.). 

8  Phillips  V.  Blatchford,  137  Mass.  510;  Ashley  v.  Dowling,  203 
Mass.  311,  89  N.  E.  434. 

1  Tyrrell  v.  Washburn,  6  Allen  466.  In  a  case  of  joint  stock  asso- 
ciation which  ai)parently  never  got  beyond  the  subscription  stage,  it 
Wits  said  that  the  iiartiicrship  was  dissolved  by  the  death  of  a  sub- 
scriber. It  (lid  not  api)ear  whether  the  shares  were  to  have  been  trans- 
ferable.    Vilas  V.  Farwell,  9  Wis.  460,  462. 

118 


Chap.  II]  DISSOLUTION   BY   DEATH  [§  27 

an  intent  to  continue  the  business  is  required.^  No 
distribution  of  the  assets  can  be  compelled,  but  the 
business  continues  as  before/^  Upon  death  of  a  member 
where  it  is  provided  that  ''the  representative  of  the 
deceased  shall  succeed  to  the  rights  of  the  deceased  in 
the  certificate  and  the  shares  it  represents,  subject  to 
the  declaration  of  trust,"  there  is  imposed  on  the  estate 
of  the  deceased  the  liability  the  deceased  would  have 
incurred  towards  debts  regardless  of  whether  the  execu- 
tor decides  to  become  a  member  of  the  firm  or  not.  In 
an  ordinary  partnership  the  estate  would  not  become 
liable  for  future  debts  unless  the  executor  decided  to 
become  personally  a  partner,  even  where  the  articles 
had  stipulated  that  he  should  become  a  partner.  But 
a  majority  of  the  court  held  that  in  an  association 
there  was  by  this  provision  an  implied  agreement  of 
indemnity  by  each  partner  against  the  debts  of  the  asso- 
ciation as  long  as  he  held  his  shares,  which  agreement 
could  be  enforced  against  the  estate  of  the  deceased.^ 
Some  courts  without  entering  into  such  refinements 
simply  hold  that  an  unincorporated  association  with 
transferable  shares  is  not  dissolved  by  death  of  a  share- 
holder.^ 

2  Machinists'  Bank  v.  Dean,  124  Mass.  81,  84. 

3  Taber  v.  Breck,  192  Mass.  355,  361,  78  N.  E.  472. 

*  Phillips  V.  Blatchford,  137  Mass.  510,  514.  Of  course  the  executor 
does  not  become  a  member  or  personally  hable  until  he  consents.  WeUs 
V.  Murray,  4  Ex.  843,  868. 

5  Wilhs  V.  Chapman,  68  Vt.  459,  35  Atl.  459  (cheese  factory) ;  Carter 
V.  McClure,  98  Tenn.  109,  116,  38  S.  W.  585  (cooperative  store). 

"The  only  distinctions  between  a  trading  company  and  an  ordinary 
co-partnership  are  that  the  capital  of  a  joint  stock  company  organized 
for  trading  purposes  is  usually  divided  into  shares  and  a  transfer  of  a 
portion  of  the  shares  without  the  consent  of  the  other  shareholders  on 
the  death  of  a  shareholder  does  not  work  a  dissolution  as  it  would  in 
an  ordinary  partnership  unless  it  is  so  stipulated  in  the  articles  of 
agreement."     HunneweU  v.  Willow  Springs  Co.,  53  Mo.  App.  245,  248. 

A  joint  stock  association  was  formed  to  deal  in  mineral  lands.    Large 

119 


§  28]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

§  28.  Winding  up  Informal  Associations  for  Profit 

A  member  may  compel  dissolution  and  liquidation 
against  the  will  of  the  majority  when  the  time  fixed 

stockholder  died.  After  his  death  valuable  deposit  discovered  and 
land  sold  at  great  advance  over  cost.  Issue  whether  dividend  from 
this  went  to  hfe  tenant  as  income  or  remainderman  as  principal. 
Trustees  held  legal  title.  Shares  transferable.  Annual  meetings. 
Held:  The  company  is  a  partnership.  Whatever  its  members'  lia- 
bilitj'  to  third  persons  may  be,  it  "  is  an  artificial  juridical  person  capa- 
ble of  acquiring,  holding  and  selling  property"  (p.  58).  The  relation 
of  stockholders  is  fixed  by  their  agreement.  As  between  themselves 
they  are  hable  for  losses  in  proportion  to  stock.  Have  no  power  to  use 
the  name  of  the  company,  interfere  with  its  business  or  bind  it  in  any 
manner.  This  they  have  entrusted  to  trustees.  Had  only  a  right  to 
elect  trustees  and  share  in  profits.  No  title  in  land  as  tenant  in  com- 
mon or  otherwise.  Interest  in  it  is  personal  estate,  to  be  ascertained 
only  by  an  account  (p.  59).  Company  not  dissolved  by  member's 
death.  Dividend  is  personal  estate  and  if  it  represents  profit  made 
since  the  death  of  a  member  it  is  like  other  income  of  his  estate.  The 
increased  price  came  not  from  change  in  actual  value,  but  from  correct 
knowledge  of  that  value.  This  occurred  after  member's  death.  Com- 
pany formed  not  to  mine,  but  to  buy  and  sell.  Hence  income  (p.  61). 
OUver's  Estate,  136  Pa.  St.  43,  20  Atl.  527. 

Association  under  declaration  of  trust  to  buy  and  sell  a  tract  of 
land.  Transferable  shares.  Only  eight  certificates.  Action  for  com- 
mission against  shareholders.  Held:  At  common  law  joint  stock  asso- 
ciations are  legal.  "Such  an  association  .  .  .  not  organized  for  en- 
gaging in  the  real  estate  business  but  for  the  purpose  of  acquiring  and 
holding  title  to  a  particular  piece  of  real  estate,  is  not  a  general  business 
partnership.  It  is  not  a  violation  of  the  Constitution  or  statutes  for  a 
number  of  people  to  get  together  to  acquire  a  particular  piece  of  prop- 
erty and  place  the  title  of  the  same  in  the  name  of  a  trustee  whose 
powers  and  authority  are  definitely  limited  and  defined  and  subject 
to  instructions  from  the '  shareholders  either  directly  or  individually 
through  a  board  electexl  by  the  shareholders  at  regularly  constituted 
meetings  of  the  shareholders.  This  constitutes  simply  a  definition  of 
the  trusts  and  powers  subject  to  which  a  particular  piece  of  real  estate 
is  held"  (p.  380).  A  partnership  may  stipulate  that  death  shall  not 
dissolve  it  and  waive  delectus  personne  (p.  382).  This  is  a  distinction 
between  joint  stock  companies  and  ordinary  partnerships.  "All  who 
have  dealings  with  a  joint  stocik  (;ompany  know  that  the  authority  to 
manage  the  business  is  conferred  upon  the  directors  and  that  a  share- 
holder as  such  has  no  power  to  contract  for  the  company"  (p.  384). 
"In  joint  stock  companies  the  shareholders  have  no  ])owers  as  agents 
unlc;ss  such  j)owers  arc  granted  eitli(>r  expressly  or  by  implication  or 
by  acquiescence  of  such  sliareliohh'rs  or  association"  (p.  368).  Hence 
held  that  death  of  ])resideiit  did  nol,  dissolve  the  assotiiation  and  that 
the  Bccretary  had  no  power  to  employ  the  i)laintilT  (p.  390).    Dissent: 

120 


Chap.  II]  WINDING  UP  INFORMAL  ASSOCIATIONS         [§  28 

by  the  articles  expires  ^  or  when  the  purpose  of  the  en- 
terprise has  become  impracticable.^  Dissolution  has 
been  decreed  on  partition  of  a  minority  wrongfully 
excluded  from  the  property  and  business  by  the  major- 
ity.^ It  was  denied  in  one  case  where  a  majority  of  the 
shareholders  opposed  dissolution  and  where  the  loss 
from  a  winding  up  would  exceed  that  of  the  plaintiff  on 

That  majority  have  created  a  hybrid  organization  half  corporation 
and  half  partnership  (p.  399).  Spotswood  v.  Morris,  12  Idaho  360,  85 
Pac.  1094,  1102. 

1  Clerk's  Inv.  Co.  v.  Sydnor,  19  A.  C.  (D.  C.)  89,  96;  Mann  v.  Butler, 
2  Barb.  Ch.  362,  368. 

2  Von  Schmidt  v.  Huntington,  1  Cal.  55. 

A  winding  up  was  ordered  of  an  unincoiporated  cheese  factory, 
supposed  to  be  run  for  profit,  but  which  had  made  no  profit  for  twenty- 
three  years.     Wilhs  v.  Chapman,  68  Vt.  459,  35  Atl.  459. 

Land  was  conveyed  to  the  members  of  a  joint  stock  association  to 
build  a  hotel.  Separate  deeds  to  each  provided  that  it  should  be  held 
without  partition.  Held :  This  was  a  vahd  condition,  not  a  pei-petuity, 
for  each  could  dispose  of  his  share.  Waived  a  statutory  right.  Failure 
to  hold  meetings  for  a  dozen  years  is  not  of  itself  a  dissolution.  Hence 
petition  for  partition  denied.    Hunt  v.  Wright,  47  N.  H.  396,  402. 

A  joint  stock  association  for  holding  county  fairs  did  no  business 
for  eight  years.  It  owned  real  estate.  Then  the  last  president  pur- 
ported to  reorganize  under  the  same  name.  New  members  were  ad- 
mitted and  new  shares  issued,  new  property  acquired  and  debts  in- 
curred. Some  of  old  shareholders  did  not  have  actual  notice  of  the 
meeting  of  reorganization.  The  new  association  purported  to  convey 
the  land  of  the  old.  Held:  Conveyance  void.  Separate  associations. 
The  old  had  practically  become  extinct  and  should  have  been  wound 
up.    Allen  V.  Long,  80  Tex.  261,  267,  16  S.  W.  43. 

Dissolution  of  a  mining  partnership  was  refused  on  petition  of  a 
purchaser  of  a  share  who  alleged  merely  lack  of  harmony  between  the 
partners  as  to  the  further  operating  of  the  lease.  He  had  a  perfect 
remedy  by  sale  of  his  share.  Blackmarr  v.  WiUiamson,  57  W.  Va.  249, 
254,  50  S.  E.  254. 

^  When  a  majority  shareholder  takes  possession  of  the  property 
and  business  of  the  association  and  excludes  minority  therefrom  and 
no  board  of  directors  is  elected  as  contemplated  by  the  agreement,  the 
majority  may  petition  for  dissolution  and  winding  up.  Werner  v. 
Leisen,  31  Wis.  169,  171. 

Bill  for  dissolution  of  partnership  of  a  ferry  association  by  a  trustee 
excluded  by  others  from  his  office.  Articles  provided  for  election  of 
trustee  on  death  or  resignation,  but  no  fixed  term  of  office.  Plaintiff 
never  resigned,  but  voted  for  self  and  others  at  an  election.  Held: 
Still  trustee  and  entitled  to  maintain  this  bill.  Berry  v.  Cross,  3  Sandf. 
Ch.  1,  5. 

121 


§  28]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

a  sale  of  his  shares.^  The  petition  should  ask  for  an 
accounting,^  and  all  shareholders  and  creditors  are 
proper  parties  defendant.^  A  bill  in  equity  for  the  ap- 
pointment of  a  receiver  is  appropriate  procedure  ^  and 
in  such  a  suit  contribution  by  the  other  members  to  the 
debts  of  the  association  -wWl  be  enforced.^  When  some 
of  the  shareholders  are  insolvent  or  out  of  the  juris- 
diction, the  rest  are  liable  in  proportion  to  their 
shares.^    As  to  creditors,  of  course,  each  is  Hable  for 

4  Hinkley  v.  Blethen,  78  Me.  221,  3  Atl.  6.55. 

=  A  shareholder  in  a  joint  stock  company  cannot  bring  an  action 
against  the  company  to  compel  pa\Tnent  to  him  on  Uquidation  of  the 
par  value  of  his  share  and  dividends,  but  must  proceed  to  an  accoimt- 
ing  after  dissolution.    Lesseps  v.  Architect  Co.,  13  La.  414. 

The  proper  procedure  to  wind  up  a  mining  partnership  is  account- 
ing and  dissolution.    Xisbet  v.  Xash,  52  Cal.  540,  550. 

«  Randolph  v.  Xichol,  74  .\rk.  93,  84  S.  W.  1037. 

"  Clerk's  Inv.  Co.  v.  Sydnor,  10  A.  C.  (D.  C.)  89,  96  (real  estate  in- 
vestment association);  Henry  v.  Simanton,  64  X.  J.  Eq.  572,  54  Atl. 
153. 

*  Hodgson  V.  Baldwin,  65  111.  532,  537  (cooperative  store.  In  this 
case  the  court  in  fact  enforced  the  principle  of  exoneration  and  not 
merely  contribution).    See  §  24,  note  16  and  §  31,  note  11. 

Though  no  calls  or  assessments  were  made  as  contemplated  by  a 
subscription  paper,  a  bill  for  contribution  may  be  brought  after  dis- 
solution of  the  partnership  and  the  personal  representatives  of  a  de- 
ceased subscriber  are  necessary  parties.  Still  r.  Holbrook,  23  Hun 
517,  519. 

The  same  equitable  rules  are  appUcable  to  the  winding  up  of  a  min- 
ing partnership  for  oil  drilling  as  a  general  partnership  and  the  firm 
assets  are  to  be  exhausted  before  individual  habihty  is  enforced.  Bart- 
lett  V.  Boyles,  66  W.  \'a.  327,  332,  66  S.  E.  474. 

'  A  bill  in  equity  for  contribution  between  members  of  a  joint  stock 
ferry  company  is  maintainable.  The  debts  were  contracted  for  the 
benefit  of  the  company  and  as  between  themselves  they  were  ulti- 
mately liable  in  proportion  to  their  interests.  As  to  creditors,  they 
were  liable  for  the  whole.  \Mien  some  of  the  members  are  insolvent 
or  out  of  the  jurisdiction  the  plaintiff  may  recover  in  equity  a  contribu- 
tion for  the  whole  from  those  who  remain.  \Vhitman  v.  Porter,  107 
Ma.ss.  522,  524. 

On  proceeding  for  winding  up  an  express  company  all  solvent  mem- 
bers must  contribute  to  the  dcbt.s  pro  rata  disregarding  the  insolvent. 
Morri.soy  i-.  Weed,  12  Hun  491,  496. 

Plaint  iff  bank  was  a  mernbiT  of  a  joint  stock  company  running  a 
mill  and  loaned  money  to  it  for  which  it  sues  members.  Held:  Fact 
that  it  w:i.4  a  member  or  that  the  membership  was  ultra  vires  is  no  de- 

122 


Chap.  II]  LIMITATION  OF  LIABILITY  [§  29 

the  whole. ^°  If  there  is  a  surplus,  the  distribution  fol- 
lows the  terms  of  the  existing  agreement  between  the 
members.  ^^ 

§  29.  Limitation  of  Liability  of  Shareholders 

It  is  familiar  law  that  partners  may  by  agreement 
modify  as  between  themselves  their  common  law  obli- 
gations,^ but  that  such  modifications  will  not  be  bind- 

fense.  Solvent  members  liable  pro  rata  their  shares.  Cameron  v.  First 
Bank,  34  S.  W.  178  (Tex.). 

A  purchaser  of  shares  in  an  unincorporated  bank  which  is  insolvent 
cannot  claim  set-off  of  the  price  he  paid  for  his  shares  in  an  accounting 
between  the  partners.  His  payment  did  not  go  into  the  capital  of  the 
firm.  He  is  not  hable  for  debts  of  the  old  firm.  Barndollar  v.  Du  Bois, 
142  Pa.  St.  565,  21  Atl.  988. 

10  Whitman  v.  Porter,  107  Mass.  522,  524. 

11  Winding  up  a  joint  stock  association  formed  to  exploit  land. 
Held:  "Each  holder  of  a  share  of  stock  was  in  equity  a  joint  owner  with 
the  other  shareholders  and  a  partner  as  to  creditors  of  the  company 
who  were  not  joint  owners"  (p.  28).  The  assets  should  be  distributed 
to  those  who  appeared  on  the  books  to  be  shareholders  excepting  shares 
owned  by  the  association  and  shares  of  the  founders  who  had  guaran- 
teed dividends  to  the  others  in  amount  exceeding  what  they  would  get 
on  the  distribution  (p.  30).    Appeal  of  Moss,  43  Pa.  St.  23. 

After  a  voluntary  dissolution  of  a  mining  company,  a  shareholder 
cannot  claim  the  profits  made  by  the  members  working  severally,  nor 
can  one  who  advanced  him  money  to  buy  his  share.  Scott  v.  Clark,  1 
Ohio  St.  382. 

Shareholders  in  a  real  estate  speculation  agreed  to  take  certain 
shares  at  a  fixed  price  and  also  to  take  the  shares  remaining  unsold. 
One  subscriber  refused  to  enter  into  the  latter  agreement.  Held:  He 
cannot  when  the  speculation  succeeds  claim  any  share  of  the  profits 
on  these  excess  shares  but  that  in  the  accounting  the  shareholders  who 
agreed  to  take  these  shares  are  not  entitled  to  have  the  profits  apphed 
to  theii-  payment  until  the  profits  are  divided.  Douglas  v.  Merceles, 
23  N.  J.  Eq.  331. 

An  informal  association  bought  real  estate  with  subscriptions  of 
certain  members,  took  title  in  trustees  and  issued  subscribers'  certifi- 
cates for  theu"  subscriptions,  agreeing  to  pay  interest.  Later  consohda- 
tion  and  new  certificate  failed  to  recite  interest  and  said  "entitled  to 
shares  in  the  real  estate."  On  winding  up,  question  is  to  whom  proceeds 
of  real  estate  go.  Held:  Trustees  really  held  for  the  association  and  the 
certificates  merely  evidenced  a  loan  secured  by  the  real  estate.  Hence 
proceeds  first  go  to  pay  loan  and  the  surplus  goes  to  association.  Craw- 
ford V.  Gross,  140  Pa.  St.  297,  323,  21  Atl.  356. 

1  Leavitt  v.  Peck,  3  Conn.  125. 

An  unincorporated  company  to  build  and  operate  a  steamboat  and 

123 


§  29]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

ing  on  those  who  deal  with,  the  firm  without  notice 
thereof.-  It  is  usually  said  that  they  are  binding  on 
those  who  do  have  notice.^    When  we  come  to  apply 

wharf  was  formed  by  an  informal  subscription  paper.  It  was  under- 
stood that  the  hability  of  the  parties  was  to  be  Umited  to  the  subscrip- 
tions. The  committee  in  charge  incm-red  debts  and  brought  a  bill  for 
contribution.  Held:  The  hmitation  on  habihty  was  binding  as  be- 
tween the  partners  and  the  committee  had  no  authority  to  incur  this 
debt.  Dictum  that  such  hmitation  is  not  binding  on  creditors  without 
notice.  "\Miether  a  ci'editor  with  notice  is  bound  bj'  it  is  said  to  be 
doubtful.  Danforth  r.  Allen,  8  Met.  334,  342.  Ace.  Clark  v.  Reed,  11 
Pick.  446,  450  (stage  hne). 

Defendant  was  member  of  a  band.  The  association  was  not  incor- 
porated. It  had  bj^-laws  which  provided  that  "If  any  member  shall 
leave  the  band,  he  leaves  all  his  interest  in  the  band."  Defendant  re- 
tired from  the  band  and  carried  off  an  instnunent  claimed  by  the  band 
and  on  refusal  to  siurender  was  sued  in  trover.  Held:  Defendant  sub- 
scribed to  by-laws  in  ^Tiling  and  so  assented  thereto.  "This  is  a  vahd 
agreement  between  the  members  and  binding  upon  them.  The  con- 
sideration upon  which  the  promise  of  each  is  founded  is  the  promise  of 
the  rest  to  do  the  same  thing."  Like  a  subscription  paper.  Though 
this  is  a  partnership  and  a  partner  cannot  sue  another  at  law  while 
partnership  affairs  are  unadjusted,  here  he  has  voluntarily  parted 
with  his  interest  in  its  property  and  may  be  sued.  Danbury  Cornet 
Band  v.  Bean,  54  N.  H.  524,  526. 

A  farmers'  union  voted  to  "start  a  store."  Plaintiff  was  employed 
as  manager  and  gave  bond.  He  acted  under  control  of  a  board  of 
directors  elected  by  the  Union  and  conducted  business  under  the  name 
of  the  Union,  but  contracted  and  incurred  habihties  in  his  individual 
name  for  which  he  seeks  contribution  from  the  members.  Held:  The 
facts  show  that  the  members  did  not  contemplate  personal  habihty 
for  the  debts  of  the  association  but  understood  that  their  habihty  was 
limited  to  their  subscriptions  and  that  changes  of  members  were  con- 
templated. As  between  themselves  this  is  not  a  pailnership.  (Strong 
dissent  of  one  judge  that  it  was  a  pai'tnership  since  it  was  an  associa- 
tion engaging  in  business  for  profit.)  McDonald  v.  Fleming,  178  Mich. 
206,  144  N.  W.  519. 

2  Tyrrell  v.  Washburn,  6  AUen  466;  see  Manning  v.  Gasharie,  27 
Ind.  399,  415;  Walbm-n  v.  Ingilby,  1  My.  &  K.  61,  76. 

Treasurer  of  a  joint  stock  company  overdrew  its  account  with  the 
plaintiff  to  pay  for  work  within  the  scope  of  the  association.  Held: 
Sliarelioldcrs  liable  as  partners.  Their  limitations  of  habihty  in  their 
articles  were  unknown  to  the  plaintiff.  Tradesman's  Bank  v.  Aster, 
1 1  W(rnd.  87,  89. 

'  A  joint  stock  a.ssociation  running  a  country  store  in  its  articles 
forbade  purchase  on  credit.  Officer  delivered  copy  of  articles  to  vendor 
and  thf^i  Ijought  on  credit.  Held:  Vendor  cannot  sue  members  as 
jiartncr.s.  Notice  of  limitation  on  authority  of  agent  was  binding. 
Reccjjtion  of  tlie  goods  was  not  ratification.  Nothing  in  that  to  notify 
defendantH.     Ilotchin  v.  Kent,  8  Mich.  526,  528. 

124 


Chap.  II]  EFFECT   OF   NOTICE  [§  30 

this  rule  to  the  highly  developed  modern  association 
organized  under  a  declaration  of  trust  in  which  it  is 
desired  to  abolish  all  personal  liability,  many  courts 
have  hesitated  to  say  that  mere  notice  is  sufficient. 

§  30.  Effect  of  Notice 

There  is  no  decision  in  Massachusetts,  for  example, 
that  if  partners  agree  that  certain  of  their  members  shall 
not  be  liable  to  creditors  in  any  form  for  the  debts  of 
the  firm,  the  creditors,  even  contracting  with  notice  of 
that  provision,  would  be  prevented  from  joining  such 
members  as  defendants.'^  Much  less  that  a  provision 
that  no  member  of  the  firm  should  be  personally  liable 
and  that  a  creditor's  only  remedy  would  be  to  attach 
firm  goods  would  be  enforced  by  the  court.  The  atti- 
tude of  the  court  towards  such  provisions  is  suggested 
by  the  following  from  the  opinion  in  Hussey  v.  Arnold: 
''We  do  not  attempt  to  determine  whether  all  the  pro- 
visions of  this  agreement  are  enforceable  in  the  courts 
or  whether  there  are  such  considerations  of  public 
policy  involved  in  an  attempt  of  this  kind  to  do  busi- 
ness without  legal  liability  of  anybody  for  debts  in- 
curred by  the  trustees  as  merit  consideration  by  the 
legislature."  ^  In  England  we  find  a  number  of  cases 
dealing  with  joint  stock  companies  where  limitations 

1  See  Danforth  v.  Allen,  8  Met.  334,  342. 

There  was  apparently  no  limitation  on  the  liability  of  shareholders 
in  Bodwell  v.  Eastman,  105  Mass.  525,  527,  and  the  other  cases  of  the 
same  period  relating  to  express  companies.  In  Cook  v.  Gray,  133  Mass. 
106,  109,  some  very  simple  articles  of  association  were  interpreted  as 
not  intended  to  hmit  hability  of  stockholders  and  they  were  allowed 
joined  as  defendants  in  contract  at  law.  Under  Massachusetts  statutes 
it  would  not  be  necessary  to  join  all  members  of  an  association  even 
where  non-joinder  is  pleaded  in  abatement.  Bank  of  Topeka  v.  Eaton, 
95  Fed.  355  (C.  C.  —  Mass.). 

2  Hussey  v.  Arnold,  185  Mass.  202,  204,  70  N.  E.  87. 

125 


§  30]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

similar  to  those  above  quoted,  although  not  the  form 
now  most  common,  were  construed.  As  against  a  di- 
rector of  the  company  ^  and  a  firm  in  which  a  director 
was  partner,  "*  such  a  limitation  of  liability  was  held  to 
prevent  recovery.  So  as  between  policy  holders  of  a 
mutual  insurance  association  where  the  liabilities  are 
wholly  between  members.^  It  was  held  not  to  bind  cred- 
itors in  the  absence  of  express  contract.^ 

A  contrary  result  was  reached  in  the  United  States 
Circuit  Court  for  Massachusetts.  Here  the  trustees 
did  refer  to  the  deed  of  trust  in  their  contract,  though 
not  expressly  contracting  against  liability  of  share- 
holders. It  was  an  action  at  law  on  a  note  of  A,  "trus- 
tee, as  trustee  under  a  declaration  of  trust  dated," 
etc.  The  court  held  that  this  obligated  the  plaintiff 
''by  its  implied  agreement  in  accepting  the  note  to 
abide  by  the  terms  of  the  articles  of  association. 
Whether  or  not  the  plaintiff  examined  the  articles  of 
association  or  knew  their  contents  is  of  no  consequence 
because  this  express  provision  required  it  to  do  so  or 
take  the  hazard  of  not  doing  it. 

"Therefore  the  only  question  is  whether  or  not  this 
implied  stipulation  limiting  its  remedy  to  the  general 
assets  of  the  association  and  the  property  specially 
pledged  to  it,  is  contrary  to  the  rules  of  law.  Of  course 
a  stipulation  in  an  instrument  which  fundamentally 

'  But  directors  were  allowed  to  charge  against  the  company  a  loan 
obtained  to  carry  on  the  business  after  capital  was  exhausted.  Some 
evidence  of  consent  of  shareholders.  The  Norwich  Yarn  Co.,  22  Beav. 
143. 

*  The  Worcester  Corn  Exchange  Co.,  3  De  G.  M.  &  G.  180. 

^  London  Marine  Ins.  Ass'n,  L.  R.  8  Eq.  176. 

«  Greenwood's  Case,  3  De  G.  M.  &  G.  459,  470,  482.  See  ex  parte 
Mcnd(?th,  32  L.  J.  Ch.  300.  Restrictions  on  liability  of  partners  bind 
only  thcrns(!lvcH  as  to  their  right  to  contribution,  Hawkcn  v.  Bourne, 
8  M.  &  W.  703;  Smith  v.  Hall  Glass  Co.,  8  Com.  B.  008,  11  Com.  B. 
897;  Ilallctt  v.  Dowdell,  18  Q.  B.  2,  43,  53. 

126 


Chap.  II]  EFFECT  OF  NOTICE  [§  30 

violates  its  essential  nature  must  sometimes  be  rejected 
by  the  courts.  For  instance,  if  any  individual  or  part- 
nership should  stipulate  in  his  or  its  pecuniary  obliga- 
tions that  he  or  it  should  not  be  personally  liable 
thereon,  without  at  the  same  time  mortgaging  or  pledg- 
ing property  or  giving  some  other  specific  lien  for  secur- 
ity, it  might  be  difficult  for  the  law  to  regard  the  stipu- 
lation, because  in  that  event  as  there  would  be  no  lien 
that  the  law  could  enforce,  the  holder  of  the  obliga- 
tion would  be  left  without  remedy  unless  he  could  pro- 
ceed by  judgment  against  the  obligor;  and  the  result, 
if  sustained,  would  be  an  obligation  which  in  law  is  no 
obligation.  The  present  case,  however,  assimilates  it- 
self to  the  large  class  of  cases  where  certain  property 
being  pledged  in  some  form  for  the  security  of  a  debt, 
the  parties  have  been  at  liberty  to  stipulate  that  the 
owner  of  the  debt  should  look  only  to  the  property 
thus  pledged.  In  the  present  case  not  only  did  the 
bank  of  Topeka  have  specified  assets  given  it  for  its 
security  but  the  entire  property  of  the  association  was 
held  in  trust  and  therefore  subject  to  administration 
by  the  chancery  courts,  which  could  apply  it  equitably 
and  proportionally  to  the  discharge  of  obligations  in- 
curred by  the  trustee  as  contemplated  by  the  express 
direction  of  the  articles  of  association  that  the  debtors 
of  the  trust  should  look  for  payment  solely  to  its 
property."  Hence  individual  shareholders  were  held 
not  liable.'^    In  another   case   in   the   Federal  Court 

^  Bank  of  Topeka  v.  Eaton,  100  Fed.  8  (C.  C.  —  Mass.),  aff'd 
by  C.  C.  A.  107  Fed.  1003;  ace.  Hotchin  v.  Kent,  8  Mich.  526, 
528;  Industrial  Co.  v.  Texas,  31  Tex.  Civ.  App.  375.  But  see  Danforth 
V.  AUen,  8  Met.  334,  342.  It  has  been  held  where  there  was  reference 
in  an  oral  contract  made  by  an  agent  of  an  unincorporated  association 
to  the  articles  of  association  which  contained  such  a  hmitation  of  lia- 
bility, that  a  plaintiff  could  not  sue  a  member  on  the  express  con- 
tract because  the  agent  had    limited  authority  only,  but  that  he 

127 


§  30]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

there  is  a  dictum  in  favor  of  the  enforceability  of  such 
provisions.^ 

If  we  accept  the  doctrine  that  mere  notice  of  hmita- 
tion  of  habihty  is  sufficient,  the  question  arises,  what 
kind  of  notice?  In  one  case  it  was  said  that  notice  by 
pubUcation  was  sufficient.^  From  the  tenor  of  the  other 
decisions  and  the  hostility  of  many  courts  to  the  whole 
principle,  it  seems  likely  that  this  case  would  not  now 
be  followed  anywhere.  Recording  the  deed  of  trust  in 
the  registry  of  deeds  would  be  notice  only  to  those  deal- 
ing with  the  real  estate.  The  statutory  requhement  in 
Massachusetts  of  filing  a  copy  of  the  deed  of  trust  with 
the  town  clerk  and  commissioner  of  corporations  is  not 

could  sue  on  a  quantum  meruit  either  the  agent  or  the  members  of 
the  association  individually.  SuUivan  v.  CampbeU,  2  HaU  (N.  Y.)  271, 
276. 

A  member  of  a  clearing  house  (unincorporated  association)  acted  as 
agent  for  another  bank  in  clearing  checks  under  rules  of  association 
which  provided  that  the  arrangement  should  not  be  discontinued  with- 
out previous  notice  which  should  not  take  effect  until  the  exchanges 
of  the  morning  following  the  receipt  of  such  notice.  The  principal 
failed  and  the  agent  bank  gave  notice  and  applied  securities  it  held  in 
reimbursement  of  checks  cleared  the  next  morning.  The  receiver  of 
the  failed  bank  claimed  these  securities  and  said  the  rule  was  invahd 
because  it  resulted  in  an  unlawful  preference.  Held:  Banks  had  a 
right  to  form  this  association  and  be  bound  by  rules  which  expressed 
the  contract  between  them.  Such  agreements  must  be  enforced  if  not 
in  conflict  with  rules  of  law.  There  was  nothing  objectionable  in  the 
agreement.  The  agency  created  a  three  party  contract  between  the 
two  banks  and  the  association.  O'Brien  v.  Grant,  146  N.  Y.  163,  173, 
40  N.  E.  871. 

8  A  judgment  was  obtained  against  agents  of  an  association  per- 
sonally for  work  done  for  this  association.  They  were  also  share- 
holders. They  contended  they  could  not  be  held  because  of  provisions 
in  the  articles  of  a.s30ciation  that  every  person  dealing  with  them  "dis- 
avows having  recourse  on  any  pretence  whatever  to  the  person  or 
separat(!  property  of  any  present  or  future  member  of  the  company." 
Held:  At  most  only  a  contract  not  to  enforce  his  judgment  against  them 
pcTsonally.  If  he  attt^mpted  to  break  it,  equity  might  grant  an  injunc- 
tion.    Davis  V.  Beverly,  2  Cranch,  C.  C.  35. 

•  Bill  in  «!(juity  to  (jnforce  notes  of  a  banking  association  whose 
articles  .stipulated  that  only  the  funds  of  the  bank  should  be  liable. 
These  arti;;lcH  had  })een  pui)lislied  and  a  cojjy  was  annexed  to  the  bill. 
Held:  That  by  reason  of  publication  the  plaintilf  must  be  presumed  to 

128 


Chap.  II]  EXPRESS  STIPULATION  [§  31 

thereby  made  notice  to  any  one.^°  It  has  been  said, 
in  the  case  of  what  was  really  not  a  partnership  but  a 
non-profit  association,  that  the  nature  of  the  associa- 
tion may  give  notice  of  limitation  of  liability  of  mem- 
bers.^^  The  same  statement  has  been  made  as  to  mining 
partnerships.^-  The  time  may  come  when  the  custom  of 
limiting  liability  of  members  of  these  unincorporated 
associations  is  so  familiar  that  courts  which  accept  the 
doctrine  of  limitation  of  liability  by  notice  will  find 
constructive  notice  from  mere  knowledge  by  the  cred- 
itor that  he  was  dealing  with  an  association  for  profit. 

§  31.    Express  Stipulation  in  Contracts  with  Third 
Parties 

It  is  evident,  however,  from  the  form  of  limitation 
now  favored  that  reliance  is  not  placed  on  the  doctrine 
of  notice  alone.  It  is  intended  to  incorporate  the  aban- 
donment by  the  creditor  of  his  common  law  rights  in 
an  express  contract.  The  tendency  of  the  decisions  is 
to  uphold  this  if  sufficiently  clear;  and  this,  it  is  sub- 
mitted, is  the  correct  principle.  Of  course,  one  contract- 
ing with  trustees  of  such  an  association  may  expressly 
agree  that  he  will  not  hold  the  trustees  to  personal  lia- 
bility.   In  that  case  he  cannot  sue  the  trustees  at  all  at 

have  known  of  the  provision  when  he  bought  his  notes.  Hence  he  can 
have  rehef  in  equity  against  the  funds  in  the  hands  of  the  trustees  but 
not  against  the  shareholders  beyond  the  subscriptions  as  called  for.  A 
decree  was  later  entered,  the  reason  for  which  is  not  clear,  and  the 
case  was  later  reversed  in  2  Pet.  482  on  questions  of  procedure.  Riggs 
V.  Swann,  Fed.  Cas.  11831. 

1"  Acts  of  1909,  ch.  441,  as  amended  by  Acts  of  1913,  ch.  454.  See 
also  Acts  of  1913,  ch.  596. 

"  Volger  V.  Ray,  131  Mass.  439. 

12  Skilhnan  v.  Lachman,  23  Cal.  198,  206.  But  it  would  seem  that 
this  case  and  others  like  it  are  due  to  a  misunderstanding  of  the  Eng- 
lish cases  which  held  merely  that  because  it  was  not  a  trading  partner- 
ship its  agents  had  no  authority  to  bind  it  by  negotiable  instruments. 
See  §  22,  note  3. 

129 


§  31]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

law.^  It  has  been  hinted  that  the  beneficiaries  might 
be  hable  in  equity  as  principals.^  If  the  contract  ex- 
pressly provided,  however,  that  no  action  could  be 
brought  against  any  one,  but  the  only  remedy  of  the 
contractor  was  to  reach  the  trust  fund,  it  is  doubtful  if 
such  provision  would  be  held  binding.^ 

There  is  an  early  decision  in  Pennsylvania  which 
accepted  with  reluctance  the  right  to  forestall  individual 
liability  by  contract.  Notes  were  issued  by  an  unin- 
corporated banking  association  containing  the  stipula- 
tion that  they  were  payable  ''out  of  their  joint  funds, 
according  to  the  articles  of  association."  Gibson,  J,, 
said:  "1  see  no  reason  to  doubt,  but  they  may  limit 
their  responsibility  by  an  explicit  stipulation  made  with 
the  party  with  whom  they  contract  and  clearly  under- 
stood by  him  at  the  time.  But  this  is  a  stipulation  so 
unreasonable  on  the  part  of  the  partnership  and  afford- 
ing such  facility  for  the  commission  of  fraud,  that  un- 
less it  appears  unequivocally  plain  from  the  terms  of 
the  contract,  I  will  never  suppose  it  to  have  been  in 
the  view  of  the  parties."  He  therefore  held  the  mem- 
bers liable.* 

1  Shoe  &  Leather  Nat.  Bank  v.  Dix,  123  Mass.  148,  151;  Glenn  v. 
Allison,  58  Md.  527  (agreement  implied  from  reference  in  a  mortgage 
to  the  deed  of  trust). 

2  Hussey  v.  Arnold,  185  Mass.  202,  204,  70  N.  E.  87.  But  see  Taylor 
V.  Davis,  110  U.  S.  330,  28  L.  cd.  163,  4  S.  Ct.  147. 

3  Hibbs  V.  Brown,  190  N.  Y.  167,  186,  196,  82  N.  E.  1108. 

*  Hess  V.  Werts,  4  Serj.  &  R.  356,  361.  Ace.  Witmer  v.  Schlatter, 
2  Rawle  359. 

Action  on  certificate  of  deposit  issued  by  an  unincorporated  savings 
association.  The  plaintiff  had  been  a  member  fourteen  years  before. 
Its  articles  stipulat(!d  that  no  contract  could  be  made  on  its  behalf 
unl<!KH  it  contained  a  stipulation  against  personal  liability  of  members. 
No  such  Htij)nIation  was  inserted  in  these;  certificates.  Held:  Sucli 
Htij)ulations  must  b(!  siiown  by  the  defendant  to  have  been  made  part 
of  I  lie  contract  to  be  enforc(;:ible.  "In  all  partnershii)s  it  is  competent 
for  any  one  d(!aling  witii  tii<;  firm  to  contract  not,  to  hold  the  partners 
liable  to  an  unlimited  extent,  but  the  onus  probandi  is  on  the  iirm  and 

130 


Chap.  II]  EXPRESS   STIPULATION  [§31 

In  a  New  York  case  relating  to  a  statutory  joint  stock 
association  the  majority  of  the  judges  seem  to  have 
felt  that  such  a  provision  was  void  as  against  public 
policy.^ 

The  English  courts,  however,  uphold  such  contracts.^ 
They  say  that  the  individuals  who  sign  the  contract 
personally  contract  that  the  capital  stock  or  funds  of 
the  company  shall  be  applied  to  answer  the  claim  on  the 

if  they  fail  in  establishing  their  case  the  general  rule  of  unlimited  lia- 
bihty  appUes  to  them  as  a  matter  of  course."  Beaver's  Adm.  v.  Mc- 
Grath,  50  Pa.  St.  479,  486,  488. 

"This  company  (insurance  underwriters)  or  association  was  not 
incorporated  and  was  in  no  wise  exempted  by  law  from  partnership 
habiUty,  except  as  it  should  by  agreement  with  the  insured  actually 
and  expUcitly  so  exempt  itself.  This  does  not  mean  that  seemingly 
constructive  notice  which  is  so  contrived  and  intended  as  to  be  hidden 
in  the  letter  and  not  to  be  perceived  or  suggested  until  searched  out 
of  its  lurking  place  after  a  loss.  It  means  a  notice  so  plain  and  fair 
that  the  party  to  be  charged  with  it  either  receives  it  or  it  is  his  own 
fault  if  he  does  not."  Imperial  Shale  Brick  Co.  v.  Jewett,  169  N.  Y. 
143,  150,  62  N.  E.  167. 

^  A  statutory  joint  stock  company  of  New  York,  the  Adams  Ex- 
press Company,  issued  bonds  stipulating  against  personal  habihty  of 
members  and  making  them  payable  only  out  of  the  funds  of  the  com- 
pany. The  issue  was  whether  the  provision  Umiting  payment  to  the 
fund  made  them  non-negotiable.  Held:  It  did  not.  O'Brien  on  the 
ground  that  they  were  practically  corporations  by  statute.  Werner, 
Bartlett  and  Cullen  on  the  ground  that  the  hmitation  of  habihty  was 
against  pubhc  pohcy  and  void.  "Personal  habihty  preserved  by  the 
legislature  and  recognized  by  the  courts."  O'Brien  intimated  that  if  it 
were  an  ordinary  partnership  he  might  agree  on  that.  Hibbs  v.  Brown, 
190  N.  Y.  167,  82  N.  E.  1108. 

But  see  Warner  v.  Beers,  23  Wend.  102,  151,  152,  apparently  contra. 
(This  case  contains  a  long  discussion  of  the  early  associations  in  Eng- 
land and  New  York.) 

8  A  contract  of  insurance  stipulated  that  "the  said  pohcy  or  anything 
therein  contained  shall  in  no  case  extend  or  be  deemed  or  construed  to 
extend  to  charge  or  render  liable  the  respective  proprietors  of  the  said 
company  or  any  of  them,"  etc.,  "to  any  claim  or  demand  whatsoever 
in  respect  of  the  said  pohcy  or  of  the  assurance  thereby  made  beyond 
the  amount  of  their,  his  or  her  individual  shares  or  share  in  the  capital 
stock  of  the  said  company,  but  that  the  capital  stock  and  funds  of  the 
said  company  shall  alone  be  charged  and  hable  to  answer  all  claims 
and  demands  by  virtue  of  the  said  assurance  or  incident  thereto." 
Held:  To  preclude  any  action  at  law  against  an  individual  shareholder. 
Halket  v.  Merchants,  etc.  Ass'n,  13  Q.  B.  960;  Hallett  v.  Dowdell, 
18  Q.  B.  2,  43,  54;  Athenaeum  Life  Assurance  Society,  4  H.  &  J.  517. 

131 


§  32]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

contract.  It  is  also  held  that  each  shareholder  may  be 
sued  and  recovered  against  to  the  extent  of  his  unpaid 
subscriptions."  They  hold  he  is  also  liable  if  the  fund 
to  which  habihty  is  hmited  is  non-existent  by  his  own 
fault. « 

Interesting  questions  will  arise  in  the  administration 
of  assets  between  creditors  who  are  bound  by  contract 
to  this  limitation  of  liability  and  general  creditors  not 
bound  by  that  stipulation.  It  has  been  held  that 
holders  of  insurance  policies  containing  such  clauses 
were  not  partners,  but  should  share  equally  with  gen- 
eral creditors.^  It  has  also  been  held  that  the  cred- 
itors who  were  limited  to  the  nominal  capital  of  the  as- 
sociation had  no  equity  of  marshalling  against  general 
creditors  who  ma^'  hold  the  individual  shareholders.^" 
A  member  who  pays  a  debt  of  the  association  is  entitled 
to  contribution.^^ 

§  32.  Remedies  of  Creditors 

A  contract  to  pay  out  of  specific  funds  does  not  create 
a  charge  on  those  funds/  but  even  before  time  of  pay- 

^  Hallett  V.  Dowdell,  18  Q.  B.  2,  43,  55;  Merchant  Traders'  Ass'n, 
5  De  G.  &  Sm.  386. 

An  action  on  an  insurance  policy  containing  such  a  Umitation  to 
recover  the  amount  of  a  shareholder's  unpaid  subscription  was  held 
properly  brought  against  the  shareholder  and  not  against  the  directors 
who  executed  the  policy.     Reid  v.  Allan,  4  Ex.  326. 

8  Mclntyre  v.  Belcher,  14  C.  B.  N.  S.  654. 

'  English,  etc.  Assurance  Society,  1  H.  &  M.  85. 

They  have  no  charge  on  the  assets  giving  them  any  priority  over 
general  creditors.    State  Fire  Ins.  Co.,  1  II.  &  M.  457. 

'0  The  Profes.sional  Life  Assurance  Co.,  L.  R.  3  Eq.  668.  See  State 
Fire  Ins.  Co.,  .34  L.  J.  Ch.  436. 

»  Phillips  V.  Bl.it ciiford,  137  Mass.  510;  Tabcr  v.  Breck,  192  Mass. 
3.55,  .361,  365,  78  N.  E.  472;  Comm.  v.  Rosen,  176  Mass.  129,  130,  57 
N.  E.  223;  I':ngvall  v.  Buchie,  73  Wash.  534,  132  Pac.  231.  See  §  24, 
note  16,  and  §  28,  note  8. 

»  Sovereign  Life  Assurance  Co.  (1892),  3  Ch.  279;  Albert  Life  Assur- 

i:i2 


Chap.  II]  TRUSTEES  OF  ASSOCIATIONS     '  [§33 

ment,  the  creditor  may  prevent  the  fund  from  being 
misapphed.^  This  does  not  amount,  however,  to  an  im- 
phed  contract  to  continue  to  carry  on  the  business.^ 
It  will  be  practically  impossible  to  sue  at  law  on  such 
contracts.  The  remedy  will  be  in  equity.'*  The  fact 
that  the  trust  deed  provides  that  the  trustees  shall  be 
free  from  personal  liability  does  not  prevent  them  from 
contracting  personally  with  a  creditor  of  the  associa- 
tion if  they  see  fit.^ 

§  33.  Trustees  of  Associations  for  Profit 

The  relations  between  the  trustees  of  associations  for 
profit  and  the  shareholders  are  determined  by  the  rules 
ordinarily  applicable  to  the  relation  of  trustee  and  bene- 
ficiary. A  shareholder  may  file  a  bill  in  equity  against 
the  trustee  to  compel  performance  of  the  trust. ^  But 
an  assignee  of  all  the  shareholders  and  of  the  interest 
of  one  of  the  trustees  cannot  bring  a  writ  of  entry  to 

ance  Co.,  9  Eq.  706;  Industrial  Co.  v.  Texas  Ass'n,  31  Tex.  Civ.  App. 
375,  380,  72  S.  W.  875. 

2  Kearns  v.  Leaf,  1  Hem.  &  M.  681;  State  Fire  Ins.  Co.,  1  De  G.  J. 
&  Sm.  634. 

3  King  V.  Accumulative  Co.,  3  C.  B.  N.  S.  151. 

*  Hallett  V.  Dowdell,  18  Q.  B.  2.  See  Grain's  Case,  1  Ch.  D.  315, 
322. 

*  A  jury  could  find  that  the  trustees  authorized  or  ratified  a  bor- 
rowing by  their  agent  on  their  personal  credit.  American  Co.  v.  Con- 
verse, 175  Mass.  449,  451,  56  N.  E.  594. 

1  Mann  v.  Butler,  2  Barb.  Ch.  362,  367;  Chapin  v.  First  Universalist 
Society,  8  Gray  580,  583. 

Shareholders  in  an  unincorporated  association  to  speculate  in  land, 
title  to  which  was  taken  in  name  of  defendant,  bring  bill  for  dissolu- 
tion of  the  association,  winding  up  and  establishment  of  trust.  Held: 
Statute  of  Limitations  did  not  begin  to  run  till  after  an  open  repudia- 
tion of  the  trust.     Barker  v.  White,  58  N.  Y.  204,  213. 

A  bill  by  beneficiaries  of  an  association  for  an  accounting  against 
the  trustee  and  manager  was  not  multifarious.  He  occupied  a  fidu- 
ciary relation  towards  the  complainants  in  both  capacities  and  his 
breaches  of  trust  relate  to  the  same  subject  matter.  Moody  v.  Flagg, 
125  Fed.  819  (C.  C.  —  Mass.). 

133 


§  33]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

recover  possession  of  a  building  the  association  has 
erected. 2  A  trustee  cannot  make  a  secret  profit  at  the 
expense  of  the  shareholders.^     Conference  of  all  the 

2  Chapin  v.  First  Universalist  Society,  8  Gray  580,  583. 

Land  was  conveyed  to  trustees  for  development  to  pay  off  a  mort- 
gage and  then  turn  over  to  the  directors  of  an  association.  The  trust 
deed  and  articles  of  association  were  different  instruments,  but  the 
latter  was  incorporated  by  reference  in  the  former.  Held:  Directors 
of  the  association  had  no  power  to  dedicate  part  of  the  land  to  the 
pubhc  without  an  act  by  the  trustees.  Ward  v.  Davis,  3  Sandf.  502, 
514. 

^  A  blind  pool  syndicate  for  dealing  in  mining  shares  through  a 
manager  on  money  borrowed  on  guarantee  of  individual  members. 
Plaintiff  was  member  of  pool  and  claimed  secret  profits  because  manager 
dealt  with  other  syndicates  in  which  he  was  interested  and  also  bought 
and  sold  directly  to  the  syndicate.  Held:  Latter  improper,  but  the 
amount  lost  was  less  than  what  plaintiff  owed  the  syndicate.  The 
deaUngs  with  other  syndicates  were  not  beyond  the  scope  of  the  au- 
thority of  the  manager  having  in  view  "the  nature  of  the  enterprise 
in  which  the  appellant  was  concerned  and  the  knowledge  which  must 
be  imputed  to  him  and  his  co-adventurers."  Laughton  v.  Griffin 
(1895),  A.  C.  104,  112. 

Syndicate  was  formed  to  speculate  in  a  certain  stock.  It  provided 
that  the  managers  should  not  be  interested  in  purchases  individually. 
The  subscribers  were  called  on  to  take  their  shares.  After  plaintiff 
had  taken  his  and  settled  with  the  managers,  he  brought  this  bill  to 
reopen  the  whole  settlement  with  self  and  associates,  alleging  that  the 
managers  had  bought  some  of  the  stock  for  themselves  and  had  made 
subscribers  take  it.  Held:  Plaintiff's  right  is  against  the  managers 
alone  and  does  not  depend  on  the  plaintiff's  ignorance  of  the  general 
partnership  account.  Plaintiff  cannot  reopen  the  settlement  with  his 
associates.  Plaintiff  may  have  action  against  the  managers  for  damages 
for  breach  of  contract.  Strong  dissent  that  must  reopen  whole  ac- 
counting.   Boody  V.  Drew,  2  Thomps.  &  C.  (N.  Y.)  69,  72. 

One  who  organized  a  syndicate  to  speculate  in  land  and  held  title 
as  trustee  and  was  also  a  shareholder  must  account  for  a  secret  profit 
made  in  turning  over  land  to  syndicate.  Court  put  it  on  ground  of 
agency,  saying  he  was  not  exactly  a  trustee.  Ferguson  v.  Bateman, 
1  App.  D.  C.  279,  290. 

Agent  of  land  sjmdicate  who  held  one  share  cannot  make  a  secret 
profit  out  of  the  syndicate  by  selling  them  land  he  bought  cheaper 
than  their  authorized  jirice.    Lyon  v.  Worcester,  49  111.  App.  639,  650. 

Minority  sluirehoiders  in  an  association  organized  under  a  deed  of 
trust  may  bring  a  ImII  for  an  acxiounting  against  the  trustee  who  is 
allegefl  to  have  acquired  sliares  wliicli  have  been  forfeited  to  the  asso- 
ciation making  a  majority  and  to  have  transferred  the  trust  funds  to  a 
coq)oralion  which  he  controls.  Booth  v.  Dodge,  69  N.  Y.  S.  673,  60 
App.  Div.  23. 

A  cooperative  store  association  made  an  arrangement  for  a  contribu- 

134 


Chap.  II]  TRUSTEES  OF  ASSOCIATIONS  [§  33 

trustees  is  not  necessary  to  action.  Being  merely  min- 
isterial officers  one  might  delegate  his  authority  to  the 
others.*  Even  when  it  is  expressly  provided  that  a 
majority  may  decide,  all  must  have  notice  or  an  oppor- 
tunity to  be  heard.^  Notice  to  one  trustee  is  notice  to 
all  and  is  not  affected  by  the  resignation  of  the  original 
trustees  and  substitution  of  new  ones.^  They  are  not 
liable  for  honest  mistakes  of  judgment,^  but  may  be 
held  responsible  for  negligence.^  It  has  been  decided 
that  when  trustees  were  held  on  an  accounting  respon- 

tion  of  capital  by  the  son  of  its  general  manager  for  which  a  certificate 
for  shares  was  issued.  Later  the  manager  mortgaged  all  the  goods  of 
the  store  to  the  son  to  secure  this,  claiming  it  had  been  a  loan.  Held: 
It  was  a  contribution  of  capital  and  not  a  loan  and  there  was  no  debt 
as  consideration  for  the  mortgage.  Hence  the  manager  must  account 
for  the  goods  in  a  suit  by  other  shareholders  (p.  622).  Declared  to  be 
a  partnership  (p.  618).  Snyder  v.  Lindsey,  157  N.  Y.  616,  52  N.  E. 
592. 

Promoters  must  make  full  disclosure  to  syndicate  members.  Arnold 
V.  Searing,  78  N.  J.  Eq.  146,  78  Atl.  762.  Re  John  A.  Fry,  4  Phila.  129. 
But  there  is  no  objection  if  full  disclosure  is  made.  McKinley  v.  Irvine, 
13  Ala.  681. 

An  unincorporated  company  with  transferable  shares  to  work  a 
gold  mine  was  organized  by  a  declaration  of  trust  by  the  owner.  The 
trustee  was  asked  by  a  shareholder  to  sell  his  share.  He  bought  it  him- 
self with  the  knowledge  and  consent  of  the  shareholder  and  paid  assess- 
ment on  it.  Later  a  rich  strike  was  made.  Held:  If  sale  was  in  good 
faith  it  was  valid  and  trustee  cannot  be  compelled  to  account  for  sub- 
sequent increase  in  value.  Swan  v.  Davenport,  119  la.  46,  96  N.  W. 
65. 

*  Wells  V.  Gates,  18  Barb.  (N.  Y.)  554,  556. 
5  Heard  v.  March,  66  Mass.  580,  584. 

*  And  a  purchaser  of  shares  was  not  in  the  position  of  a  purchaser 
for  value  without  notice  of  a  constructive  trust  in  the  lands  included 
in  the  express  trust  when  the  trustees  were  chargeable  with  notice. 
Bisbee  v.  MacKaye,  215  Mass.  21,  25,  102  N.  E.  327  (partnership  real 
estate  trust). 

^  Directors  of  a  banking  association  are  not  hable  to  stockholders 
for  mistakes  of  judgment  honestly  made  where  they  acted  without 
compensation  and  exercised  their  best  skill  and  judgment.  Addams's 
Appeal,  15  W.  N.  Cas.  230  (Pa.). 

*  Trustees  of  an  unincorporated  savings  bank  were  held  liable  for 
negligence  in  entrusting  its  funds  to  a  banking  firm  that  had  gone  into 
the  stock  brokerage  business  and  later  became  insolvent.  For  over 
two  years  they  paid  no  attention  to  the  business.  Hoknes  v.  McDonald, 
226  lU.  169,  80  N.  E.  714. 

135 


§  33]  ASSOCL\TIOXS   FOR  PROFIT  [Chap.  II 

sible  for  losses  due  to  their  negligence,  they  should  bear 
it  equally  and  not  in  proportion  to  their  share  hold- 
ings,^ ^Managers  who  are  not  shareholders  are  hable 
for  the  debts  of  the  association  only  in  case  of  exceed- 
ing authority  or  fraud.^"  Trustees  have  no  imphed 
power  to  add  to  the  capital  of  the  association  by  bor- 
rowing money, ^^  and  for  an  obligation  incurred  per- 
sonally for  such  a  purpose  they  have  no  right  of  indem- 
nity against  the  other  shareholders.^- 

Some  curious  decisions  in  relation  to  such  trustees 
seem  inconsistent  with  elementary  principles  of  trusts. 
It  has  been  held  that  the  remedy  for  negligence  of  syn- 
dicate  managers  of  what  appears  to  have  been  an  asso- 
ciation for  profit  in  extending  a  loan  was  an  action  for 
breach  of  contract  at  law  and  not  an  accounting  in 
equity. ^^  It  has  also  been  held  that  shareholders  can- 
not bring  a  cross  bill  for  exoneration  against  the  di- 

9  Coit  V.  Tracy,  9  Conn.  1.5,  21. 

A  defect  in  a  chain  of  title  was  claimed  to  exist  because  it  passed 
through  certain  trustees  of  land  for  a  development  association  and  the 
consent  of  the  latter  to  the  conveyance  did  not  appear.  Held:  The 
trustees  wiU  be  presumed  to  have  been  also  members  of  the  association 
and  so  beneficially  interested.  Hence  the  New  York  statute  vesting 
title  in  the  beneficiaries  did  not  apply.  Hence  the  trustees  had  au- 
thority to  convev  good  title.  King  v.  Townshend,  141  X.  Y.  358,  364, 
36  X.  E.  513. 

1"  Greenup  v.  Barbee's  Exec,  1  Bibb.  320  (Ky.). 

A  bill  for  an  accounting  was  brought  by  shareholders  against  the 
trustees  to  charge  them  for  losses  in  managing  a  hotel  alleged  to  be  out- 
side the  scope  of  the  purposes  of  the  association.  Quimby  v.  Tap  ley, 
202  Mass.  601,  89  X.  E.  167. 

»i  Burmestcr  v.  Xorris,  6  Ex.  796;  Ricketts  v.  Bennett,  4  C.  B.  688; 
Hawtayne  v.  Bourne,  7  M.  &  W.  595;  Hawken  t'.  Bourne,  8  M.  &  W. 
703. 

«  Re  Worcester  Company,  3  De  G.  M.  &  G.  ISO;  Ex  parte  Chip- 
pendale, 4  De  G.  M.  &  G.  43;  Austrahan  Co.  v.  Mounsey,  4  K.  &  J. 
733.  For  cases  on  the  right  of  indemnity  of  trustees,  see  §  43,  notes  12 
et  seq.,  §  44,  note  23,  and  §  64,  notes  2  and  3. 

"  This  case  is  perhaps  explained  on  the  theor>'  that  the  members  of 
the  8>Tidicatc  were  independent  contractors  and  not  partners.  The 
point  was  not  discussed.  Paton  v.  Clark,  156  Pa.  49,  53,  27  Atl. 
116. 

136 


Chap.  II]  TRUSTEES  OF  ASSOCIATIONS  [§  33 

rectors,  who  were  also  defendants  in  the  original  suit, 
for  negligence  in  incurring  a  debt  on  the  ground  that 
the  relation  of  principal  and  surety  did  not  exist  be- 
tween them.^^  Where  the  trustees  of  an  association 
converted  its  property  they  were  held  liable  in  tort  at 
law.^^ 

Since  liability  for  torts  is  joint  and  several  in  equity 
as  at  law  beneficiaries  may  bring  a  bill  in  equity  for  an 
accounting  for  wrongdoing  by  the  trustees  though  all 
are  not  within  the  jurisdiction,  but  if  the  purpose  is  to 
enjoin  contemplated  action  by  some  of  the  trustees 
looking  to  the  dissolution  or  winding  up  of  the  associa- 
tion, it  is  necessary  that  all  trustees  be  within  the  juris- 
diction and  be  made  parties,  otherwise  there  might  be 
conflicting  decisions  in  different  jurisdictions  as  to  the 
action  contemplated.^*^  The  provisions  for  selection  of 
new  trustees  to  fill  vacancies  must  be  strictly  complied 
with.  Thus  where  the  deed  of  trust,  empowering  the 
remaining  trustees  to  appoint  the  new  trustee,  pro- 
vided that  they  express  their  choice  by  executing  a 
formal  certificate  to  that  effect,  a  mere  vote  without 
such  a  certificate  was  held  not  to  entitle  the  person 
elected  to  bring  a  bill  for  an  injunction  against  the  re- 
maining trustees  to  certify  their  selection. ^^  Trustees 
have  power  to  issue  shares  as  provided  in  the  deed  of 
trust  even  after  the  land  which  was  the  original  capital 
of  the  enterprise  has  been  sold.^^ 

"  Manning  v.  Gasharie,  27  Ind.  399. 

16  ''Wlien  trustees  commit  any  act  not  inseparable  from  their  lia- 
bilities as  such  they  are  amenable  like  other  individuals  in  an  action 
of  tort."    Dennis  v.  Kennedy,  19  Barb.  517,  526. 

i«  American  Cotton  Oil  Trust.  Wall  v.  Thomas,  41  Fed.  620  (C.  C. 
—  N.  Y.). 

"  McFaddin  v.  Wiess,  168  S.  W.  486,  490  (Tex.). 

18  Yeaman  v.  Galveston  City  Co.,  167  S.  W.  710,  720  (Tex.) 

137 


§  34]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

§  34.  Propriety  of  Investment  by  Trustees  in  Shares  in 
Associations  for  Profit 

A  question  has  been  raised  as  to  the  propriety  of  in- 
vestments by  trustees  in  securities  of  unincorporated 
associations.  In  the  case  of  Smith  v.  Smith  the  Massa- 
chusetts Supreme  Court  held  that  shares  in  the  Mas- 
sachusetts Electric  Companies,  an  unincorporated  as- 
sociation holding  bonds  and  stocks  of  street  railways 
of  eastern  Massachusetts  outside  of  Boston,  was  an 
improper  investment  for  trustees.^  If  these  associa- 
tions are  partnerships  the  ground  for  the  decision  is 
obvious.  The  danger  to  partners  does  not  arise  dur- 
ing comfortable  business  times.  It  comes  with  financial 
failures  due  usually  to  the  carelessness  or  dishonesty  of 
representatives.  The  distinguished  gentlemen  now  act- 
ing as  trustees  doubtless  may  safely  be  trusted  even  to 
delegate  wisely  their  authority  necessarily  involved  in 
the  management  of  these  large  interests.  But  can  the 
shareholders  be  sure  that  their  successors  in  the  trust 
will  be  equally  trustworthy?  As  yet  these  trusts  are 
held  by  individuals  and  not  by  trust  companies,  just 
as  the  early  railroad  trust  mortgages  were  held  by  indi- 
vidual financiers.  It  may  be  that  this  business  will  be 
transferred  ultimately  to  the  trust  companies,  although 

1  After  the  opinion  in  this  case  was  handed  down  and  printed  in  an 
unofficial  pubhcation  called  the  Banker  &  Tradesman,  of  June  27,  1908, 
counsel  (tailed  the  attention  of  the  court  to  an  error  in  the  proceedings 
below  which  it  was  claimed  should  have  deprived  the  court  of  jurisdic- 
tion. The  opinion  was  thereupon  withdrawn  and  the  case  recommitted 
to  tlie  lower  court,  wh(!r(!  it  was  immediately  settled.  The  case  was  not 
dficidwi  on  the  ground  that  it  was  a  i)artner8hip.  Indeed,  it  may  still 
])('  lliat  the  court  will  follow  Smith  v.  Anderson,  supra,  as  to  these 
holding  trusts.  In  a  later  decision  the  court  said,  "the  ])ropriety  of 
th«!  investment  of  trust  funds  in  sccHU'ities  of  this  character  is  not  pre- 
H(!nted  by  tjie  amendc^d  record  and  this  (juestion  is  postponed  for  de- 
cision until  it  ])roi)erly  arises."  Gardiner  v.  Gardiner,  212  Mass.  508, 
'M  N.  10.  171. 

138 


Chap.  II]  GOVERNMENTAL  CONTROL  [§  35 

they  are  now  hardly  equipped  to  manage  directly  in- 
dustrial enterprises.  The  risks  to  shareholders  are  even 
more  obvious  in  the  trusts  whose  assets  consist  of  stocks 
and  bonds  of  public  service  corporations  on  which 
other  bonds  are  often  issued.  The  assurance  of  a  trust 
estate  sufficient  to  meet  obligations  is  less  likely  than 
in  the  case  of  real  estate.  It  seems  likely,  however,  that 
the  law  as  to  liabilities  of  shareholders  in  these  organi- 
zations will  soon  be  settled  by  decisions  and  it  is  to  be 
hoped  that  the  courts  will  take  a  broad  view  of  the 
questions  so  that  securities  issued  by  unincorporated 
associations  will  be  able  to  compete  with  those  of 
corporations.  If  the  organization  which  issued  the 
shares  is  not  a  partnership  but  a  trust,  there  can  be  no 
impropriety  in  the  purchase  of  them  by  trustees. 

§  35.   Governmental  Control  over  Associations  for  Profit 

The  cause  of  the  recent  development  of  these  associ- 
ations is  doubtless  the  desire  to  escape  troublesome 
statutes  regulating  corporations  which  interfere  with 
plans  for  combination  and  stock  watering,  the  un- 
pleasant certainty  of  taxation  and  the  publicity  of 
returns.  Is  there  any  immunity  from  regulation  in 
these  associations  which  derive  no  franchise  from  the 
State? 

It  was  originally  supposed  that  Eliot  v.  Freeman  ^ 
decided  that  real  estate  trusts  could  not  constitutionally 
be  taxed,  but  the  court  simply  said  that  the  original 
Federal  Corporation  Tax  as  written  did  not  include 
them.  It  is  to  be  noted,  however,  that  the  justifica- 
tion of  the  constitutionality  of  the  Federal  Corpora- 
tion Tax  was  put  on  the  ground  that  it  was  a  tax  on  a 

1  220  U.  S.  178,  197,  55  L.  ed.  424,  31  S.  Ct.  360. 
139 


§  35]  ASSOCL\TIOXS  FOR  PROFIT  [Ch.u'.  II 

prhilege  conferred  by  the  State  or  Federal  Government, 
and  the  real  estate  trusts  were  said  to  have  no  such 
prhilege. 

The  amendment  to  the  Interstate  Commerce  Act 
authorizing  regulation  of  rates  provided  that  "the 
term  common  carrier  as  used  in  this  act  shall  include 
express  companies.''  It  was  held  by  the  United  States 
Supreme  Court  that  this  included  the  great  express 
companies  though  they  are  partnerships.  Judge 
Hohnes  said:  ''The  power  of  Congress  is  hardly  de- 
nied. The  constitutionaHty  of  the  statute  as  against 
corporations  is  estabhshed  and  no  reason  is  suggested 
why  Congress  has  not  equal  power  to  charge  the  part- 
nership assets  with  a  habihty  and  to  personifj^  the  com- 
pany so  far  as  to  collect  a  fine  by  a  proceeding  against 
it  in  the  company  name."  The  court,  however,  refers 
to  the  Xew  York  cases  to  show  the  ''semi-corporate 
standing  of  these  companies.''  - 

Except  for  the  filing  statute  above  noted.  Massa- 
chusetts has  not  yet  attempted  to  regulate  these  asso- 
ciations. The  EngUsh  Companies  Act  now  pro^'ides 
that  the  number  of  an  unincorporated  partnership  shall 
not  exceed  twenty  numbers.^ 

The  Federal  Income  Tax  of  1913  expressly  includes 
associations  with  corporations  as  subject  to  the  tax.  It 
also  makes  special  provision  for  taxing  partnerships. 
It  seems  Ukely,  therefore,  that  the  next  important  de- 
cision on  the  nature  of  these  associations  will  occur  in 
litigation  arising  under  this  statute. 

There  has  been  no  decision  directly  passing  upon  the 
right  to  regulate  unincorporated  associations  as  dis- 

»  United  States  v.  Adams  Express  Co.,  229  U.  S.  381,  390,  57  L.  ed. 
1237,  33  S.  Ct.  878. 

»  8Edw.  VII.c.  G9,  §  1. 

140 


Chap.  II]  GOVERNMENTAL   CONTROL  [§  35 

tinguished  from  all  other  partnerships.  Regulations 
discriminating  between  corporations  on  the  one  hand 
and  unincorporated  associations  and  individuals  on 
the  other  raise  a  somewhat  similar  problem  but  one 
much  easier  of  solution,  since  corporations  having  a 
franchise  from  the  State  are  clearly  subject  to  regula- 
tion. The  principle  involved  in  the  two  cases  must  be 
the  same,  however,  though  its  application  will  be  differ- 
ent. When  the  restrictions  placed  upon  corporations 
are  less  than  those  upon  associations  or  individuals, 
that  is,  when  the  design  is  to  restrict  a  business  to  cor- 
porations, the  analogy  becomes  closer.  Of  such  a  case 
Judge  McLain  said:  ''The  question  is  as  to  the  right 
to  discriminate  between  classes  by  way  of  regulation  of 
the  business,"  (unincorporated  associations,  partner- 
ships and  individuals  on  the  one  hand  and  corpora- 
tions on  the  other).  "That  such  discrimination  may 
be  made  when  based  on  a  reasonable  distinction  involv- 
ing the  public  welfare  cannot  be  questioned;  and  if  the 
distinction  between  classes  is  reasonable  and  not  purely 
artificial  and  the  statute  is  applicable  to  all  who  come 
within  the  limits  of  the  classification,  its  constitution- 
ality cannot  be  questioned."  ^  It  has  been  held  that 
shares  in  such  associations  cannot  be  taxed  to  the 
owner. ^  But  that  the  association,  like  other  partner- 
ships, must  be  assessed  in  the  town  of  its  principal 
place  of  business.^  The  distinction  made  between  shares 
in  corporations  and  shares  in  associations  was  that 
whereas  the  former  were  property  under  Massachusetts 

*  Restrictions  on  unincorporated  building  and  loan  associations 
greater  than  those  on  corporations  held  constitutional.  Brady  v. 
Mattern,  125  la.  158,  163,  100  N.  W.  358. 

*  Hoadley  v.  County  Commissioners,  105  Mass.  519,  526. 

6  Ricker  v.  American  Loan  &  Trust  Co.,  140  Mass.  346,  349,  5  N.  E. 
284;  Wilhams  v.  Boston,  208  Mass.  497,  94  N.  E.  808. 

141 


§  35]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

decisions,  the  latter  simply  represented  an  undivided 
partnership  interest  in  the  net  assets  of  the  associa- 
tion which  was  otherwise  taxed. '^ 

On  the  other  hand,  it  has  been  held  recently  that 
shares  in  real  estate  trusts  are  not  choses  in  action  but 
a  substantial  property  right  and  are  subject  to  the  suc- 
cession tax  like  shares  in  domestic  corporations.^ 

It  has  been  held  that  the  Massachusetts  corporate 
franchise  tax,  an  excise  on  the  corporation  based  on 
the  excess  in  market  value  of  its  aggregate  share  capital 
over  the  assessed  value  of  its  tangible  property  other- 
wise taxed,  cannot  be  extended  to  associations.^  The 
reasons  given  were  that  the  association  did  not  ask  any 
special  privilege  of  the  legislature  and  that  its  peculiar 
features  were  created  by  agreement  of  the  members 
under  their  natural  rights  at  common  law.  ''We  do 
not  see  how  this  peculiar  feature  (transferability  of 
shares)  can  be  called  a  commodity,  subject  to  special 
excise,  any  more  than  the  agreement  of  co-partnership 
itself  or  any  clause  or  part  of  it  or  any  other  agreement, 
right  or  mode  of  transacting  any  business  can  be  called 
a  commodity  and  so  liable  to  taxation  at  the  will  of  the 
legislature."  The  true  meaning  of  this  decision  has 
been  the  subject  of  discussion  in  subsequent  decisions.^" 

^  Hoadley  v.  County  Commissioners,  105  Mass.  519,  526. 

8  Peabody  v.  Treasurer,  215  Mass.  129,  102  N.  E.  435.    See  §  21. 

Shares  in  a  joint  stock  association  of  New  York  owned  by  a  de- 
ceased resident  in  New  York  arc  personal  property  and  taxed  at  full 
value  though  part  of  the  assets  of  the  association  was  real  estate,  which 
if  it  had  descended  to  tlie  heirs  of  the  deceased  would  have  been  exempt. 
Re  Jones,  172  N.  Y.  575,  65  N.  E.  570. 

Shares  in  a  New  York  joint  stock  association  owned  by  a  resident 
of  Nc;w  Jersey  are  liable  to  a  transfer  tax  on  his  decease  on  the  propor- 
tion of  their  value  which  the  property  within  the  State  bore  to  the  en- 
tire property  of  the  association.  Re  Wilbner's  Estate,  138  N.  Y.  S. 
049,  153  App.  Div.  S04. 

»  (ilea.son  v.  McKay,  134  Mass.  419,  425. 

"  See  Minot  v.  Winthrop,  162  Mass.  113,  38  N.  E.  512. 

142 


Chap.  II]  GOVERNMENTAL  CONTROL  [§  35 

Not  long  since  the  legislature  of  Massachusetts  ex- 
ercised its  constitutional  right  and  asked  the  opinion 
of  the  justices  on  the  constitutionality  of  a  stock  trans- 
fer tax  including  a  tax  on  shares  in  unincorporated  as- 
sociations. The  judges  differed  in  opinion,  a  majority 
holding  such  a  tax  valid  —  three  on  the  ground  that  an 
excise  in  Massachusetts  can  be  levied  on  a  privilege 
which  is  the  exercise  of  a  natural  right.  Four  judges 
denied  this,  and  three  held  that  transferability  of  shares 
in  a  partnership  is  an  immaterial  distinction  from  other 
partnerships  and  cannot  be  a  basis  for  classification, 
but  one  (now  the  Chief  Justice)  held  that  transferability 
of  such  shares  was  not  a  natural  right  because  a  business 
dependent  on  such  elaborate  provisions  which  require 
constant  resort  to  the  courts  for  their  enforcement  may 
be  regulated  by  the  legislature,  but  he  did  think  that 
an  excise  on  the  existence  of  such  an  association  or  on 
the  holding  of  property  by  it  would  be  unconstitutional. 
It  is  not  entirely  clear  whether  or  not  the  justices 
thought  that  doing  business  in  the  form  of  a  partner- 
ship is  taxable  provided  that  the  excise  applies  to  all 
partnerships.^^  The  legislature  of  Massachusetts,  how- 
ever, in  enacting  the  stock  transfer  tax  of  1914  included 
a  section  making  it  applicable  to  transfers  of  shares  in 
voluntary  associations  organized  under  a  written  in- 
strument or  declaration  of  trust  the  beneficial  interest 
in  which  is  divided  into  transferable  shares. ^^  An 
authoritative  decision  of  the  court  on  the  constitu- 
tionality of  this  section  of  the  law  will  doubtless  soon  be 
rendered. 

11  Opinion  of  the  Justices,  196  Mass.  601,  615,  620,  626,  85  N.  E. 
545. 

12  Acts  of  1914,  ch.  770,  §  10,  as  amended  by  Acts  of  1915,  ch.  238, 
§5. 

143 


§  36]  ASSOCIATIONS  FOR  PROFIT  [Chap.  II 

§  36.   The  Uniform  Partnership  Act 

No  discussion  of  the  subject  of  this  chapter  would 
be  complete  without  consideration  of  the  effect  on  it 
of  the  codification  of  the  law  of  partnership  which  was 
adopted  in  1914  by  the  Conference  of  Commissioners 
on  Uniform  State  Laws.  This  Code  will  doubtless  be 
enacted  into  law  in  some  of  the  States  before  this  book 
goes  to  press.  It  makes  some  changes  in  the  law  of 
partnership  and  makes  certain  many  things  that  were 
before  in  confusion.  As  the  result  of  twelve  years'  dis- 
cussion among  the  Commissioners  and  their  expert 
advisers  it  is  doubtless  the  best  practical  solution  of  a 
perplexing  problem  and  without  regard  to  its  fundamen- 
tal soundness  ^  will  be  welcomed  for  its  promise  of  defi- 

1  In  no  department  of  the  law  has  controversy  been  keener  than 
between  the  advocates  of  the  so-called  "entity  theory"  of  partnership 
and  the  advocates  of  the  so-called  "common  law"  theory.  The  sup- 
porters of  the  latter  have  regarded  themselves  as  paladins  of  a  cherished 
principle  handed  down  from  a  golden  age  of  the  common  law  pure  and 
undefiled  and  have  affixed  that  worst  stigma  of  the  practitioner,  "theo- 
rist," to  those  who  sought  to  make  consistently  visible  throughout  the 
framework  of  the  subject  the  basic  logic  which  the  instinct  of  mer- 
chants has  always  applied  to  the  practical  aspects  of  this  purely  mer- 
cantile relation.  When  the  commissioners  began  consideration  of  this 
subject  the  late  Dean  Ames  was  employed  to  draw  an  act  in  accordance 
with  the  mercantile  conception  of  partnership  of  which  he  had  been 
one  of  the  greatest  advocates.  Later,  however,  the  defenders  of  the 
faith  rallied  their  forces  and  gradually  brought  the  Conference  to  adopt 
formally  the  other  theory.  Attempts  to  make  such  a  code  logically 
consistent  then  resulted  in  several  drafts  which  have  culminated  in 
on(!  which  is  in  itself  a  conclusive  confirmation  of  the  soundness  of  the 
mercantile  view.  It  has  often  been  noted  that  those  jurisdictions  that 
were  loudest  in  their  approval  of  the  "common  law"  theory  of  part- 
n(!r.ship  were  the  first  to  d(ipart  from  it  in  reality  when  wrestling  with 
Hix'cific  jiroblcins.  The  proposed  code,  while  asserting  with  emphasis 
the  fav(jrit(!  rule  of  tlu;  supporters  of  the  conunon  law  theory,  viz., 
that  th(!  partners  as  indiviihiuls  have  a  projjerty  right  in  the  specific 
properly  of  (lie  i)artii('rsliip,  creates  for  that  property  right  a  new  name, 
—  tenancy  in  ijarlncrsliii)  —  and  then  j)roce(uls  by  definition  to  efimi- 
natc;  from  it  nil  es.scntial  incidents  of  i)roperty  rights,  leaving  in  it  only 
a  modified  right  to  poHsession.     The  otlicr  unportant  changes  in  the 

144 


Chap.  II]  UNIFORM   PARTNERSHIP   ACT  [§  36 

nite  rules  instead  of  conflicting  opinions.  The  Code 
defines  partnership  as  ''an  association  of  two  or  more 
persons  to  carry  on  as  co-owners  a  business  for  profit."  ^ 
It  makes  no  distinction  between  small  partnerships  and 
large  associations.  On  some  points  already  discussed 
in  this  chapter  it  makes  certain  the  rule  towards  which 
the  courts  seemed  tending,  but  in  the  main  it  will 
efiect  few  changes  in  the  law  applicable  to  what  are 
herein  called  unincorporated  associations.  Since  the 
problems  involved  in  the  modern  associations  formed 
under  elaborate  deeds  of  trust  arise  mainly  from  express 
agreement  of  the  parties  defining  their  relations,  the 
Code  will  have  no  effect  on  them  except  where  the 
plans  of  their  organizers  break  down. 

One  of  the  most  important  parts  of  the  new  Code  is 
that  dealing  with  real  property.  Title  to  firm  real 
estate  may  be  acquired  and  conveyed  in  the  partner- 
ship name.^  A  conveyance  in  the  firm  name  by  any 
partner  passes  the  title  in  such  real  estate  to  the  gran- 
tee, but  the  firm  may  recover  it,  if  the  partner's  act 
does  not  ''bind  the  partnership,"  unless  the  land  has 
passed  to  a  "holder  for  value  without  knowledge  that 
the  partner  in  making  the  conveyance  has  exceeded  his 
authority."^  "Knowledge"  is  defined  to  include 
"knowledge  of  such  facts  as  in  the  circumstances  shows 
bad  faith."  ^  Where  title  to  real  property  is  in  the 
name  of  the  partnership,  a  conveyance  executed  by  a 
partner,  in  his  own  name,  passes  the  equitable  interest 
of  the  partnership,  provided  the  act  is  one  within  the 

law  which  this  code  will  produce  aU  tend  towards  consistency  with 
the  mercantile  view  of  partnership.  If  the  act  had  emanated  from  a 
legislative  committee  should  we  suspect  that  the  radicals  had,  in  the 
language  of  the  day,  "put  one  over  on"  the  conservatives? 

2  Section  6  of  the  Act.  »  Section  8  (3). 

*  Section  10  (1).  *  Section  3  (1). 

145 


§  36]  ASSOCIATIONS   FOR   PROFIT  [Chap.  II 

authority  of  the  partner  ''as  previously  defined.^ 
Where  title  to  real  property  is  in  the  name  of  one  or  more 
but  not  all  the  partners  and  the  record  does  not  disclose 
the  right  of  the  partnership,  the  partners  in  whose  name 
the  title  stands  may  convey  title  to  such  property,  but 
the  partnership  may  recover  such  property  if  the  part- 
ners' act  does  not  bind  the  partnership"  as  previously 
defined  ''unless  the  purchaser  or  his  assignee  is  a 
holder  for  value  without  knowledge."  ^  "Where  the 
title  to  real  property  is  in  the  name  of  one  or  more  or 
all  the  partners,  or  in  a  third  person  in  trust  for  the 
partnership,  a  conveyance  executed  by  a  partner  in  the 
partnership  name  or  in  his  own  name,  passes  the  equi- 
table interest  of  the  partnership,  provided  the  act  is 
one  within  the  authority  of  the  partner"  as  previously 
defined.^  "Where  the  title  to  real  property  is  in  the 
names  of  all  the  partners  a  conveyance  executed  by  all 
the  partners  passes  all  their  rights  in  such  property."^ 
All  of  these  provisions  are  simply  the  application  of 
common  sense  to  a  business  problem.  So  far  as  they 
change  existing  law  they  are  wholly  desirable. 

The  next  important  change  in  the  present  law  relates 
to  changes  in  the  membership  of  the  firm.  "A  person 
admitted  as  a  partner  into  an  existing  partnership  is 
liable  for  all  the  obligations  of  the  partnership  arising 
before  his  admission  as  though  he  had  been  a  partner 
when  such  obligations  were  incurred  except  that  this 
liability  shall  be  satisfied  only  out  of  partnership  prop- 
erty." ^°  "A  conveyance  by  a  partner  of  his  interest 
in  the  partnership  does  not  of  itself  dissolve  the  part- 
nership." 1^    "The  dissolution  of  a  partnership  is  the 

•  Section  10  (2)  ^  Section  10  (3). 

8  Section  10  (4).  »  Section  10  (5). 

»"  Section  17.  "  Section  27  (1). 

146 


Chap.  II]  UNIFORM   PARTNERSHIP   ACT  [§  36 

change  in  the  relation  of  the  partners  caused  by  any 
partner  ceasing  to  be  associated  in  the  carrying  on  as 
distinguished  from  the  winding  up  of  the  business."  ^^ 
"On  dissolution  the  partnership  is  not  terminated,  but 
continues  until  the  winding  up  of  partnership  affairs 
is  completed."  ^^ 

The  effect  of  dissolution  on  existing  liabilities  of  the 
firm  is  left  unchanged  by  the  Code.^^ 

The  rights  of  creditors  upon  a  change  in  the  member- 
ship of  a  firm  without  a  liquidation  are  further  treated 
in  an  elaborate  series  of  rules/^  which,  without  chang- 
ing the  rule  that  change  of  membership  is  a  dissolu- 
tion, in  substance  provide  that  creditors  of  the  firm  as 
it  was  before  the  change  in  membership  are  creditors 
of  the  firm  that  exists  thereafter  (the  new  partners'  lia- 
bility to  be  satisfied  only  out  of  the  partnership  prop- 
erty) and  thereby  establish  their  right  to  reach  the 
property  employed  in  the  business.  Under  these  rules 
a  shareholder  in  a  partnership  association  who  sells  his 
share  does  not  thereby  escape  liability  for  debts  con- 
tracted during  his  membership  unless  the  courts  find 
from  the  nature  of  the  organization  that  the  creditor 
impliedly  agreed  to  accept  his  transferee  as  debtor  in 
place  of  the  transferor  by  way  of  novation;  in  the 
absence  of  such  agreement  the  transferee  is  not  person- 
ally liable  for  debts  incurred  before  the  transfer,  but 
creditors  may  reach  directly  the  property  of  the  asso- 
ciation whether  their  claims  accrued  before  or  after  the 
transfer  of  shares  in  question;  and  transfer  of  shares 
effects  a  technical  dissolution  of  the  partnership.  It 
is  to  be  expected,  however,  that  courts  which  have 
shown  a  tendency  to  classify  associations  as  something 

12  Section  29.  i^  Section  30. 

"  Section  36.  i^  Section  41. 

147 


§  36]  ASSOCIATIONS   FOR  PROFIT  [Chap.  II 

distinct  from  other  partnerships,  will  hold  ultimately 
that  the  natm*e  of  these  organizations  is  so  familiar  and 
the  understanding  of  business  men  that  their  obliga- 
tions are  to  be  enforced  only  against  the  association 
as  it  exists  at  the  time  of  enforcement  so  common  that 
a  novation  is  implied  in  every  case  of  transfer  of  shares. 
The  creation  by  the  act  of  a  new  property  right  to 
be  known  as  tenancy  "in  partnership"  is  the  only 
change  in  the  law  as  now  generally  accepted  regarding 
the  natiu-e  of  a  partner's  interest  in  the  property  of  the 
firm.  While  this  as  previously  explained  is  apparently 
a  mere  change  in  nomenclature,  it  will  probably  over- 
rule some  decisions  that  have  been  much  criticised,^^ 
which,  however,  are  not  of  especial  concern  in  the  kind 
of  partnership  discussed  in  this  chapter. 

1^  If  the  partner  is  to  have  theoretically  a  property  right  in  the 
property  of  the  firm  in  addition  to  his  right  to  an  accounting  and  pay- 
ment of  his  share  in  the  net  assets  (which  in  the  Code  is  described  as 
his  interest  in  the  partnership  as  distinguished  from  his  interest  in 
specific  partnership  property)  it  is  difficult  to  see  how  his  right  to 
share  in  assets  unexpectedly  reahzed  upon  by  one  partner  after  disso- 
lution would  be  barred  by  the  statute  of  Umitations  which  bars  en- 
forcement of  the  right  to  an  accounting  as  in  Knox  v.  Gye,  L.  R.  5 
H.  L.  C.  656.  This  is  borne  out  by  §  30,  which  provides  that  on  dis- 
solution a  partnership  continues  "until  the  winding  up  of  partnership 
affairs  is  completed." 


148 


CHAPTER   III 

TRUSTS 

§  37.   In  General 

Trusts  for  large  numbers  of  beneficiaries  whose  in- 
terests may  or  may  not  be  represented  by  transferable 
certificates  are  but  a  natural  outgrowth  of  simple  ex- 
press trusts  and  the  rules  of  law  applicable  to  them  are 
those  which  have  been  established  with  reference  to 
all  other  trusts.  The  possibilities  of  the  instruments 
creating  such  trusts  are  infinite,  because  so  far  there 
has  been  little  attempt  by  legislatures  to  regulate  or 
restrict  them.  The  possibility  that  it  may  be  held  that 
the  rule  against  perpetuities  or  the  rule  against  re- 
straints upon  alienation  apply  to  trusts  of  the  charac- 
ter here  considered  has  been  fully  discussed  and  it  is 
usual  to  avoid  this  possibility  by  appropriate  limita- 
tion upon  the  duration  of  the  trust. ^  The  forms 
of  trust  deeds  are,  therefore,  various  and  the  con- 
struction placed  upon  one  is  not  always  helpful  in 
determining  the  true  meaning  of  another.-    The  ones 

1  Hart  V.  Seymour,  147  111.  598,  35  N.  E.  246;  Howe  v.  Morse,  174 
Mass.  491,  503,  55  N.  E.  213  (these  were  trusts  for  associations  for 
profit,  but  the  same  principle  must  apply  to  pure  trusts).  Gray,  Per- 
petuities, 3d  ed.,  §  509.    See  §  11. 

^  A  trust  deed  was  acknowledged,  delivered  and  accepted  by  the 
trustees  in  New  York  where  the  gi'antor  then  resided.  The  trust  estate 
was  stock  in  corporations  organized  in  four  different  States.  No  place 
of  performance  was  designated.  Held:  The  instrument  is  to  be  con- 
strued by  the  law  of  New  York  without  reference  to  the  residence  of  the 
trustees  or  the  later  residence  of  the  grantor.  Mercer  v.  Buchanan, 
132  Fed.  501  (C.  C  — Pa.). 

A  holding  trust  deed  was  interpreted  to  confer  on  the  trustees  the 

149 


§  37]  TRUSTS  [Chap.  Ill 

more  conunonly  used  in  modern  business,  however, 
fall  into  a  few  well-recognized  classes,  each  having 
certain  characteristics. 

There  are  still  other  business  relations  which  should 
properly  be  classified  as  trusts,  but  which  have  not 
yet  been  so  defined  by  the  courts.  The  relation  between 
underwTiters  of  securities  and  the  managers  of  the 
sjTidicate,  for  example,  has  usually  been  deemed  that 
of  principal  and  agent.  In  underwriting  agreements  as 
formerly  drawn  this  was  probably  the  correct  conclu- 
sion and  the  cases  are  therefore  considered  with  other 
" unassociated  groups"  in  Chapter  IV. ^  The  members 
of  these  syndicates,  however,  do  not  contemplate  in- 
curring the  liability  of  a  principal  for  acts  of  their  man- 
agers, nor  do  they  need  to  exercise  the  control  over  their 
managers  that  a  principal  has  over  his  agent.  In  the 
more  recent  underwriting  agreements  the  transaction 
really  takes  the  form  of  a  trust  in  which  the  manager 
holds  the  funds,  or  rather  the  obligations  of  the  sub- 
scribers to  furnish  funds,  as  trustee  for  them  and  con- 
tracts for  their  benefit,  but  as  a  principal  holding  legal 
title  and  not  as  an  agent.'* 

There  have  been  occasional  instances  in  the  reports 
of  trusts  under  wills  empowering  the  trustee  to  con- 
tinue the  testator's  share  in  a  partnership  for  the 
benefit  of  certain  beneficiaries.  These  cases  are  cited  as 
authorities  in  cases  involving  the  more  formal  trusts 
for  numerous  beneficiaries.^ 

power  to  sell  stock  as  well  as  buy  it.  Not  accountable  if  act  in  good 
faith,    (iould  V.  Mead,  41  Fed.  240  (C.  C.  —  Col.). 

3  See  §§8  and  50. 

*  Jones  V.  Gould,  209  N.  Y.  419,  424,  426,  103  N.  E.  720.  See  §  53, 
note  3. 

'  IJurwell  V.  Mandeville's  Exec,  2  How.  560;  Ex  -parte  Garland,  19 
Yes.  110;  Ex  parte.  Ilicliardson,  3  Mad.  Ch.  79;  Re  Johnson,  15  Ch.  D. 
548. 

150 


Chap.  Ill]  TRUSTS   FOR  CREDITORS  [§  38 

The  distinction  between  partnership  associations  and 
pure  trusts  has  already  been  discussed  at  length.*^  It 
is  sufficient  here  to  say  that  the  essential  elements  of  a 
partnership  which  are  lacking  in  pure  trusts  are  the 
element  of  association  and  the  right  on  the  part  of  the 
beneficiaries  to  direct  and  control  the  management  of 
the  funds  by  the  trustees.  The  cases  involving  trusts 
organized  for  the  purpose  of  conducting  a  business  or 
for  the  purpose  of  holding  securities  or  property  as  an 
investment  for  numerous  beneficiaries  whose  interests 
are  represented  by  transferable  shares,  so  far  as  they 
relate  to  the  nature  of  the  organization  are  not  repeated 
here. 

§  38.  Trusts  for  Creditors 

An  instance  of  trusts  of  this  sort  is  that  created  by 
an  assignment  for  the  benefit  of  creditors.  It  frequently 
happens  that  the  assignees  are  empowered  to  run  a 
business  and  apply  its  profits  to  the  liquidation  of  the 
claims  of  creditors.  Even  where  the  deed  of  assignment 
purports  to  give  the  assignee  this  power  to  continue 
the  business  he  should,  for  his  own  protection,  obtain 
the  consent  of  creditors  ^  or  he  may  be  held  personally 
liable  for  losses.  Such  assent  may  be  found  from  execu- 
tion of  a  deed  of  assignment  containing  such  a  provision. 
In  some  cases  the  agreement  for  this  purpose  which  is 
signed  by  the  creditors  creates  what  is  really  a  partner- 
ship,^  but  in  most  instances  it  will  be  found  that  the 

6  See  §  9. 

1  Hill  V.  Cornwall,  95  Ky.  526;  Cooper  v.  Lankford,  117  Ky.  792,  78 
S.  W.  197;  Wilhelm  v.  Byles,  60  Mich.  561,  567,  27  N.  W.  847;  Quimby 
V.  Uhl,  130  Mich.  198,  211,  89  N.  W.  722;  Brown's  Estate,  193  Pa.  St. 
281,  44  Atl.  443. 

2  Creditors  of  an  insolvent  business  had  it  transferred  to  trustees  who 
carried  it  on  for  their  benefit  to  pay  off  their  claims  and  then  turn  it  over 

151 


§  39]  TRUSTS  [Chap.  Ill 

creditors  are  simply  beneficiaries  acting  as  individuals 
and  not  really  as  a  group  or  association.  ''The  profits 
which  the  trustee  applies  to  their  claims  are  the  debtors' 
profits,  not  theirs.  They  are  not  the  proprietors  of  the 
business.  They  have  not  the  right  to  direct  and  con- 
trol the  acts  of  the  trustee  as  a  principal  would  an  agent. 
The  trust  is  really  created  as  security  for  their  claims."^ 

39.  Car  Trusts 

Another  form  of  trust  with  transferable  shares  famil- 
iar to  investors  is  the  so-called  "Car  Trust."  This  is  a 
method  of  financing  the  purchase  of  rolling  stock  of  a 
railroad  by  giving  a  first  lien  on  the  rolling  stock  when 
purchased  and  thus  preventing  it  from  coming  under 
the  lien  of  the  general  railroad  mortgages.  They  have 
usually  been  organized  so  as  to  be  held  to  be  not  part- 
nerships.^ 

to  the  original  owners.  The  net  income  which  was  to  be  distributed  was 
always  to  be  regarded  as  the  property  of  the  old  firm.  A  majority  of  the 
creditors  could  make  rules  for  the  conduct  of  the  business  and  decide  to 
discontinue  it.  An  action  was  brought  on  bills  of  exchange  accepted 
by  an  agent  of  the  trustees  against  certain  creditors  who  had  signed  the 
indenture  of  trust.  Held :  Not  a  partnership  because  no  mutual  agency 
of  the  certificate  holders.  Cox  v.  Hickman,  8  H.  L.  C.  268.  The  defi- 
nition of  partnership  announced  in  this  case  (known  as  the  mutual 
agency  test)  has  been  generally  repudiated. 

3  Smith  V.  Williams,  178  III.  420,  53  N.  E.  358;  Sterns  Co.  v.  Wil- 
liams, 178  111.  G26,  53  N.  E.  361;  Wells-Stone  Mercantile  Co.  v.  Grover, 
7  N.  D.  460,  465,  75  N.  W.  911;  Re  Stanton  Iron  Co.,  21  Beav.  164. 

1  Railroad  directors  and  promoters  formed  car  trusts.  There  was  a 
trustee  who  issued  certificates  in  each  trust  to  the  subscribers.  Brown, 
J.,  said,  "The  car  trust  associations  were  not  corporations  or  partner- 
ships nor  legal  entiticjs  of  any  description,  but  were  simply  car  trust  cer- 
tificates in  th(!  hands  of  various  persons  who  were  represented  by  the 
petitionee,  McClourk(!y."  Held  on  peculiar  facts  of  case  that  the  pur- 
chiiHcs  w(T(^  really  made  by  tlic  corporation  and  not  by  the  car  trusts, 
antl  l,li(!  rolling  stock  came  imder  the  general  mortgage.  McGourkcy 
V.  Toledo  Co.,  14()  [J.  S.  53(5,  557,  36  L.  ed.  1079,  13  S.  Ct.  170. 

TruHte(!.s  of  a  oar  trust  signc^d  a  second  lease  with  the  railroad  reduc- 
ing the  rati;  of  interest.  Tlu^y  signed  as  trustees  but  expressly  said  they 
(•xecut(;d  only  on  behalf  of  such  c(;rtificate  holders  as  should  consent, 

152 


Chap.  Ill]  TRUSTS   FOR   BONDHOLDERS  [§  40 

§  40.  Trusts  for  Bondholders 

Trusts  under  mortgages  executed  by  corporations  to 
secure  issues  of  bonds  are,  in  some  aspects,  examples  of 
the  sort  of  trust  under  consideration.  Ordinarily  the 
functions  of  the  trustee  are  purely  formal  and  the  real 
business  relation  exists  between  the  mortgagor  cor- 
poration and  the  bondholders  as  creditors.  With  this 
relation  we  have  no  concern.^  In  the  relation  of  the 
trustee  to  the  bondholders  will  be  found  sometimes 
illustrations  of  the  la^  applicable  to  trusts  conducting 
business  enterprises.^  When  such  a  trustee  gets  abso- 
lute title  by  entry  and  possession  for  the  statutory 
period,  he  may  execute  the  trust  by  liquidating  and 
dividing  the  net  proceeds  among  the  bondholders.^ 
In  one  case  he  was  held  justified  in  leasing  the  road  in- 

etc.  Some  did  not  consent  and  the  trustees  sued  on  the  old  lease  for 
the  higher  rate  for  them,  the  lower  rate  having  been  paid  the  others. 
Held:  No  inconsistency  in  allowing  recovery  on  the  old  lease  in  this 
way.  It  does  not  matter  what  authority  the  trustees  had  to  bind  the 
minority  when  they  did  not  purport  to  exercise  it.  "  In  our  view  whether 
the  car  trust  is  a  partnership  or  a  joint  stock  association  or  a  quasi-cor- 
poration  is  not  of  the  least  importance."  Humphrey  v.  N.  Y.,  etc.  R.  R. 
Co.,  121  N.  Y.  435,  447,  24  N.  E.  695. 

Where  the  trust  deed  provided  for  a  real  association,  it  was  held  to 
be  a  partnership.  Ricker  v.  American  L.  &  T.  Co.,  140  Mass.  346,  5 
N.  E.  284. 

1  In  this  treatise  we  are  not  concerned  with  the  mutual  obhgations 
between  the  trustees  and  the  corporation  or  between  individual  bond- 
holders and  the  corporation.  For  a  full  discussion  of  the  subject  see 
Jones  on  Corporate  Mortgages  and  Bonds. 

2  When  the  trustee  is  to  certify  bonds  and  superintend  the  sale  of 
them  and  the  apphcation  of  the  proceeds  and  to  do  other  things  in- 
volving discretion,  it  constitutes  the  transaction  of  business  and 
when  done  in  a  State  by  a  foreign,  corporation  subjects  it  to  regu- 
lation as  such.  Farmer's  Co.  v.  Lake  Street  Ry.  Co.,  173  111.  439,  51 
N.  E.  55. 

A  by-law  authorizing  bondholders  to  vote  for  directors  was  held  in- 
valid as  contrary  to  the  statutes  providing  for  vote  by  stockholders. 
The  interests  of  stockholders  and  bondholders  are  diverse.  Durkee  v. 
People,  155  lU.  354,  40  N.  E.  626. 

^  Haven  v.  Grand  Jimction  Co.,  12  AUen  337. 

153 


§  41]  TRUSTS  [Chap.  Ill 

stead  of  liquidating.^  It  sometimes  happens  that  upon 
a  foreclosure  the  trustee  is  obUged  to  take  possession 
and  operate  the  business  for  a  time,  though  he  usually 
does  this  through  a  receiver  appointed  by  the  court. 

§  41.  Voting  Trusts 

Voting  trusts  of  stock  in  corporations  are  a  form  of 
trust  in  which  the  beneficial  interest  is  frequently  rep- 
resented by  transferable  certificates  similar  to  the  cer- 
tificates of  stock  which  have  been  deposited  by  the 
shareholders  with  the  voting  trustee  and  for  which  they 
are  substitutes.  The  trust  is  an  active  one  because  the 
trustee  through  his  voting  power  controls  the  policy 
of  the  corporation  and  the  trust  is  usually  formed  to 
insure  a  consistent  poUcy  on  the  part  of  the  corpora- 
tion for  a  certain  period  for  the  benefit  of  its  other 
security  holders.  The  duties  of  the  trustee,  however, 
are  more  limited  than  m  most  of  the  other  forms  of 
trust  under  consideration.  A  voting  trust  is  legal  from 
the  standpoint  of  the  law  of  corporations  if  the  holders 
of  all  the  shares  have  an  equal  privilege  (after  fair  in- 
formation) of  availing  themselves  of  the  trust  agree- 
ment if  they  shall  so  choose  and  if  the  object  of  the 
trust  is  the  equal  benefit  of  all  shares.^ 

§  42.   Combinations 

The  original  Standard  Oil  Trust,  which  was  held  in 
Ohio  to  be  a  partnership,^  was  held  in  New  York  not  a 

*  Sturges  V.  Knapp,  31  Vt.  1. 

»  Warron  v.  Pirn,  66  N.  J.  Eq.  353,  59  Atl.  773.  Such  agreements 
were  upheld  in  Brightman  v.  Bates,  175  Mass.  105,  55  N.  E.  809;  Lord 
V.  Equitable  Soc,  194  N.  Y.  212,  238,  87  N.  E.  443;  Boyer  v.  Nesbitt, 
227  Pa.  St.  398,  76  Atl.  103. 

>  State  V.  Standard  Oil  Co.,  49  Ohio  St.  137,  17G,  30  N.  E.  279. 

154 


Chap.  Ill]  RIGHTS   OF   CREDITORS  [§  43 

partnership  but  a  trust.-  It  was  a  highly  organized 
association  with  transferable  shares  and  on  a  bill  in 
equity  to  compel  a  transfer  of  shares  on  the  books  of 
the  trustees,  which  was  defended  on  the  ground  that 
the  transferee  was  a  rival  oil  producer  and  did  not  seek 
membership  in  good  faith,  the  court  held  that  the 
trustees  had  no  more  discretion  than  a  corporation  and 
compelled  the  transfer.^  It  would  seem  that  the  de- 
sire of  the  court  to  enforce  the  transfer  and  to  avoid  a 
supposed  obstacle  in  the  familiar  rule  of  delectus  per- 
sonae  applicable  to  ordinary  partnerships,  led  it  into 
the  declaration  that  this  association  was  not  a  part- 
nership. 

§  43.  Rights  of  Creditors  1 

The  important  question  in  regard  to  all  these  forms 
of  organization  is  as  to  the  rights  of  creditors  in  the 
collection  of  their  claim.  In  the  absence  of  some  stipu- 
lation in  the  contract  to  the  contrary,  it  is  well  settled 
that  one  who  contracts  with  a  trustee  has  a  contract 
right  at  law  against  the  trustee  personally,  since  courts 
of  law  purport  to  ignore  the  existence  of  trusts  and  the 
trustee  does  not  act  as  agent  for  his  beneficiaries  but  is 
himself  the  principal. ^    An  action  at  law  against  the 

2  Rice  V.  Rockefeller,  134  N.  Y.  174,  179,  31  N.  E.  907. 

3  Ibid. 

1  See  §§  32  and  33.       ^ 

2  Taylor  v.  Davis,  110  U.  S.  330,  334,  28  L.  ed.  163,  4  S.  Ct.  147; 
American,  etc.  Co.  v.  Converse,  175  Mass.  449,  56  N.  E.  594;  Roger 
Williams  Bank  v.  Groton  Co.,  16  R.  I.  504,  17  Atl.  170;  Ex  parte  Gar- 
land, 10  Ves.  110,  118  (trustee  carrying  on  business  under  directions  in 
will);  Cutbush  w.  jCutbush,  1  Beavan  184  (ditto);  Lucas  z;.  Williams, 
4  D.  F.  &  J.  438  (ditto);  Fenwick  v.  Laycock,  2  Q.  B.  108  (ditto);  Re 
Evans,  34  Ch.  D.  597,  600  (ditto). 

In  actions  on  notes  of  trustees,  it  has  been  held  that  the  addition  of 
the  word  "trustee"  to  the  name  of  the  maker  was  merely  descriptio 
personae.  Comes  v.  Clark,  12  Cal.  168;  Fiske  v.  Eldridge,  12  Gray  474; 
New  V.  Nicholl,  73  N.  Y.  127. 

155 


§  43]  TRUSTS  [Chap.  IIT 

trustees  of  a  real  estate  trust  was  brought  by  a  cred- 
itor and  an  attachment  of  real  estate  of  the  trust  was 
attempted.  Later  the  trust  became  insolvent  and  was 
placed  in  the  hands  of  a  receiver.  The  attaching  cred- 
itor sought  bj''  petition  to  have  his  claim  allowed  in 
priority.  This  was  refused  on  the  ground  that  on  no 
theory  had  a  valid  attachment  been  made.  The  court 
said:  ''The  trustees  held  the  legal  title  to  all  the  prop- 
erty and  they  alone  could  make  contracts.  Ordinarily, 
in  the  absence  of  special  limitations,  trustees  bind 
themselves  personally  by  their  contracts  with  third 
persons.  Actions  at  law  upon  such  contracts  must 
be  brought  against  them  and  judgments  run  against 
them  personally.  This  is  because  the  relations  of 
the  cesiuis  que  trust  to  their  contracts  are  only  equi- 
table and  do  not  subject  them  to  proceedings  in  a 
court  of  common  law  and  the  property  held  in  trust 
is  charged  with  equities  which  hold  it  aloof  from 
the  jurisdiction  of  a  court  of  law  to  take  it  and  ap- 
ply it  in  payment  of  debts  created  by  the  trustees. 
Such  debts,  if  proper  charges  upon  the  trust  estate 
can  be  paid  from  it  under  the  authority  of  a  court 
of  equity.  ...  If  the  trustees  contracted  in  the  usual 
way  without  referring  to  anything  which  would  limit 
the  liability  resulting  from  an  ordinary  contract,  they 
are  personally  liable  to  these  petitioners  and  judg- 
ment can  be  obtained  and  enforced  against  them 
individually;  but  the  trust  property  cannot  be  held 
under  an  attachment  nor  sold  upon  an  execution  for 
their  personal  debts."  ^ 

The  trustee  may  also  be  held  personally  liable  for 
torts  committed  in  the  execution  of  the  trust  by  himself 

»  Husscy  V.  Arnold,  185  Mass.  202,  204,  70  N.  E.  87. 
150 


Chap.  Ill]  RIGHTS   OF   CREDITORS  [§  43 

or  his  agents.^  The  HabiUty  of  trustees,  in  cases  where 
there  are  more  than  one,  has  been  held  to  be  joint  and 
several.^  Stipulations  in  contracts  by  trustees  exempt- 
ing the  trustee  from  personal  liability  have  been  held 
effective.^  A  covenant  by  trustees  ''as  such  trustees 
but  not  otherwise"  to  repay  a  loan  is  merely  a  covenant 
to  repay  the  money  out  of  any  trust  funds  coming  into 
their  hands  and  does  not  impose  any  personal  liability 
upon  them.^  It  is  equally  well  settled  that  one  who  con- 
tracts with  a  trustee  has  no  right  of  action  against  the 
beneficiaries  personally.^  The  decisions  have  been  less 
clear  as  to  the  right  of  the  creditor  to  reach  the  funds  of 
the  trust.  It  is  plain  that  in  order  to  recover  the  cred- 
itor must  show  that  ''the  obligation  was  incurred  by 
the  trustees  in  the  com-se  of  their  duty  in  administering 
the  trust  out  of  which  satisfaction  is  sought."  ^     At 

^  Negligence  of  servants.  Parmenter  v.  Barstow,  22  R.  I.  245,  47 
Atl.  365;  see  Fallardeau  v.  Boston  Ass'n,  182  Mass.  405,  65  N.  E. 
797;  Curry  v.  Dorr,  210  Mass.  430,  97  N.  E.  87. 

A  trustee  under  a  mortgage  securing  bonds  while  in  possession  and 
operating  the  business  is  liable  for  negligence  hke  any  other  employer. 
Ballou  ?;.  Farnum,  9  Allen  47;  Daniels  v.  Hart,  118  Mass.  543;  Strat- 
ton  V.  European  R.  R.,  76  Me.  269;  Wright  v.  Raihoad,  151  N.  C.  529, 
535,  66  S.  E.  588. 

^  So  that  one  whose  right  of  indemnity  might  be  barred  could  be 
omitted.    Re  Frith,  (1902)  1  Ch.  D.  342. 

6  Glenn  v.  Allison,  58  Md.  527;  Shoe,  etc.  Bank  v.  Dix,  123  Mass. 
148;  Mitchell  v.  Whitlock,  121  N.  C.  166,  28  S.  E.  292.  See  Hussey  v. 
Arnold,  185  Mass.  202,  204,  70  N.  E.  87;  see  §§  29  to  31,  inclusive. 

In  Glenn  v.  AUison,  supra,  the  agreement  was  implied  from  reference 
in  a  mortgage  to  the  deed  of  trust  which  provided  that  the  trustee 
should  not  be  personally  hable. 

'  Re  Robinson's  Settlement,  (1912)  1  Ch.  717. 

8  Everett  v.  Drew,  129  Mass.  150. 

Transferable  scrip  issued  to  finance  an  invention.  Mayo  v.  Moritz, 
151  Mass.  481,  484,  24  N.  E.  1083. 

^  A  by-law  ot  the  Buena  Vista  Fruit  Company,  an  association  or- 
ganized under  a  deed  of  trust,  provided  "that  the  treasurer  shall  'make, 
sign,  endorse  and  accept  for  and  in  the  name  and  behalf  of  the  company 
promissory  notes,  drafts  and  checks  in  the  regular  course  of  its  business.' 
The  note  in  suit  was  made  in  accordance  with  this  by-law.  It  is  not 
signed  by  the  trustees,  but  by  the  treasurer  of  the  association  in  its 

157 


§  43]  TRUSTS  [Chap.  Ill 

law  it  would  seem  that  the  creditor  has  no  right  to  at- 
tach the  trust  fund/"  but  there  seems  no  reason  why 
such  right  should  not  be  given  b}'  proper  proceedings  in 
equity. ^^    The  trustee  has  a  right  of  exoneration  out  of 

name.  Article  11  of  the  declaration  of  trust  probacies  that  'all  contracts 
and  engagements  entered  into  by  the  trustees,  and  aU  conveyances  and 
instruments  executed  by  the  trustees,  shaU  be  in  the  respective  names 
of  the  trustees  and  shaU  provide  against  any  personal  Uabihty  on  their 
part,  and  stipulate  that  no  other  property  shall  be  answerable  than  the 
property  in  the  hands  of  the  trustees.'  Plainly  the  note  in  suit  is  not 
the  obhgation  of  the  trustees  executed  in  accordance  with  the  power 
thus  conferred,  but  the  note  of  the  company  executed  bj'  its  agent  pur- 
suant to  its  by-laws.  Neither  in  fact  nor  in  legal  contemplation  is  it  the 
note  of  the  trustees.  It  follows  that  the  plaintiff  has  not  brought  his 
case  within  the  principle  of  law  on  which  his  biU  is  framed  and  on 
which  he  recovered  in  the  Superior  Court,  viz.,  that  when  a  trustee  has 
incurred  an  obhgation  in  conducting  the  trust,  the  person  to  whom  that 
obhgation  is  due  can  satisfy  it  out  of  the  trust  estate.  Hence  the  de- 
cree in  favor  of  the  plaintiff  was  wrong,  founded  as  it  was  upon  that 
principle  of  law."  Frost  v.  Thompson.  219  :\Iass.  360,  106  X.  E.  1009. 
See  §  14,  note  11. 

10  Pillgrem  v.  Pillgrem,  IS  Ch.  D.  93  (trustee  under  will  carrjdng  on 
business  in  own  name).    See  FarhaU  v.  Farhall,  7  Ch.  123. 

In  a  few  cases  the  trust  estate  has  been  reached  in  an  action  at  law. 

In  an  action  of  tort  for  neghgence  in  a  court  having  both  law  and 
equit}'  jurisdiction,  one  of  the  defendants  was  a  trustee  operating  a 
railroad  for  the  benefit  of  creditors  and  he  was  held  hable  in  his  official 
capacity  and  the  trust  estate  subjected  to  pajonent.  The  coiu-t  said 
also  that  he  might  have  been  held  hable  personally.  Wright  v.  Railroad, 
151  X.  C.  529,  535,  66  S.  E.  588. 

Defendants  were  sued  as  trustees  in  tort  for  negligence.  Under  the 
deed  of  trust  they  "were  empowered  to  deal  with  the  property  as  if 
they  were  absolute  o'micrs  thereof.  It  is  also  provided  that  no  responsi- 
bUity  whatever  shall  result  to  them  by  reason  of  misconduct  of  agents  or 
employees  and  also  'for  negligence  there  shall  be  no  habUity  or  respon- 
sibihty '  upon  the  part  of  the  trustees."  Held :  "  It  was  clearly  intended 
that  the  risk  of  any  loss  in  this  respect  should  be  assumed  and  borne 
by  the  estate."  A  judgment  against  the  trustees  as  such  was  affii'med. 
Prinz  i;.  Luca.s,  210  Pa.  St.  620,  60  Atl.  309. 

"  Mason  I'.  Pomeroy,  151  Mass.  164,  167,  169.  24X.E.  202  (trustees 
carrj'ing  on  a  factory  under  terms  of  a  will) ;  Woddrop  v.  Weed,  154  Pa. 
St.  307,  26  Atl.  375  (trustee  carrj'ing  on  under  a  will  a  business  which 
became  insolvent). 

"The  general  rule  undoubtedly  is  that  a  trustee  cannot  charge  the 
trust  estate  by  his  executory  contracts  unless  authorized  to  do  so  by 
the  temna  of  the  instrument  creating  the  trust.  Upon  such  contracts  he 
is  personally  liable  and  the  remedy  is  against  him  personally.  But 
there  are  exceptions  to  this  general  rule.  Wlien  a  trustee  is  authorized  to 
make  an  expenditure  and  he  has  no  trust  funds  and  the  expenditure  is 

158 


Chap.  Ill]  RIGHTS   OF  CREDITORS  [§  43 

the  trust  fund  for  any  liabilities  he  has  properly  incurred 
personally  in  the  management  of  the  trust  estate.  ^^  It 
is  entirely  consistent  with  the  usual  principles  of  equity 
jurisdiction  to  give  the  creditor  a  right  to  avail  himself 
of  the  trustee's  right  against  the  trust  fund,  and  there 
are  decisions  to  this  effect. ^^  In  the  absence  of  agree- 
ment, however,  there  would  be  no  reason  for  holding 
that  such  a  creditor  had  any  lien  upon  the  trust  fund.^* 
If  the  trustee  is  absent  from  the  State  or  is  insolvent 
(and  these  are  the  only  cases  in  which  it  will  be  impor- 
tant for  the  creditor  to  have  this  right),  the  creditor 
should  be  allowed  to  proceed  against  the  trust  estate 
without  joining  the  trustee. ^^  The  creditor's  right 
would,  of  course,  be  limited  to  the  extent  of  the  trus- 
tee's right  in  any  given  case  and  if  any  equity  exists 
against  the  trustee  in  favor  of  the  trust  estate  with  re- 
spect to  the  particular  right  of  exoneration  in  question, 
the  creditor  must   be   equally  restricted.^''     In  some 

necessary  for  the  protection,  reparation  or  safety  of  the  trust  estate,  and 
he  is  not  willing  to 'make  himself  personally  hable,  he  may  by  express 
agi'eement  make  the  exj^enditure  a  charge  upon  the  trust  estate.  In 
such  a  case  he  could  himself  advance  the  money  to  make  the  expendi- 
tiu-e  and  he  would  have  a  hen  upon  the  trust  estate,  and  he  can  by 
express  contract  transfer  this  hen  to  any  other  party  who  may  upon 
the  faith  of  the  trust  estate  make  the  expenditure."  Trust  under  a  will. 
New  V.  NichoU,  73  N.  Y.  127,  131. 

12  Hardoon  v.  Behhos,  (1901)  A.  C.  118,  124;  Bennett  v.  Wyndham,  4 
De  Gex.  F.  &  J.  259  (tort). 

"  Mason  v.  Pomeroy,  151  Mass.  164,  167,  169,  24  N.  E.  202;  Dowse 
V.  Gorton,  40  Ch.  D.  536;  Ex  parte  Edmunds,  4  De  G.  F.  &  J.  488; 
Re  Raybould,  (1900)  1  Ch.  199  (judgment  creditor  in  action  of  tort); 
Moore  v.  M'Glynn,  (1904)  1  Ir.  R.  334. 

1*  Hewitt  V.  Phelps,  105  U.  S.  393,  26  L.  ed.  1072;  New  v.  NichoU, 
73  N.  Y.  127. 

15  Norton  v.  Phelps,  54  Miss.  467.  See  Hewitt  v.  Phelps,  105  U.  S. 
353,  400,  26  L.  ed.  1072,  where  the  same  case  came  up  on  diverse  citi- 
zenship.   The  Norton  case  was  cited  as  settling  the  Mississippi  law. 

i«  Broadway  National  Bank  v.  Wood,  165  Mass.  312,  316,  43  N.  E. 
100;  Dunham  v.  Blood,  207  Mass.  512,  514,  93  N.  E.  804;  King  v. 
StoweU,  211  Mass.  246,  98  N.  E.  91;  Strickland  v.  Symons,  22  Ch.  D. 
666,  26  Ch.  D.  245;  Re  Evans,  34  Ch.  D.  597;  Re  Johnson,  15  Ch.  D. 

159 


§  M]  TRUSTS  [Chap.  Ill 

States,  however,  the  creditor  has  been  allowed  to  reach 
the  trust  fund  regardless  of  the  state  of  the  accounts  be- 
tween him  and  the  estate. ^^  The  beneficiaries  are  not 
necessary  parties  defendant  in  actions  on  contracts  or 
torts  of  the  trustees,  when  the  trust  instrument  makes 
him  their  representative,  even  though  the  purpose  of 
the  suit  is  to  reach  the  trust  fund.^^  A  court  of  equity 
will  set  aside  preferences  given  by  a  trustee  out  of  the 
trust  estate  after  it  is  insolvent  and  distribute  it 
equally  to  all  creditors. ^^ 

§  44.  Mutual  Obligations  of  Trustee  and  Beneficiary  i 

The  obligation  of  good  faith  on  the  part  of  the  trus- 
tee towards  the  beneficiary  is  the  origin  of  the  whole  law 
of  fiduciaries  which  has  come  to  play  so  important  a 
part  in  the  adjustment  of  our  complicated  modern  re- 
lations. He  cannot  make  a  secret  profit  at  the  expense 
of  his  beneficiary.^  Acting  in  good  faith,  a  trustee  for 
bondholders  was  held  justified  in  bidding  in  the  mort- 

54S;  Dowse  v.  Gorton,  (1891)  A.  C.  190;  Re  Raybould,  (1900)  1  Ch. 
199;  Newton  v.  Ralfe,  (1902)  1  Ch.  342,  345;  Boylan  v.  Fay,  8  L.  R. 
Ir.  374;  Re  Morris,  23  L.  R.  Ir.  333. 

»7  Wylly  V.  Collins,  9  Ga.  223;  Willis  v.  Sharp,  113  N.  Y.  586,  21 
N.  E.  705;  Mandcrson's  Appeal,  113  Pa.  St.  651,  6  Atl.  346;  Cater  v. 
Evorlcigh,  4  Dcs.  Eq.  (S.  C.)  19. 

'*  See  §  45,  notes  1-5. 

'8  By  will  a  business  was  left  to  a  trustee  with  full  power  to  operate  it 
for  the  widow  and  other  beneficiaries.  The  trustee  did  so  until  tlie  busi- 
ness became  insolvent  and  the  trustee  also.  He  allowed  creditors  to 
confess  judgment  against  the  trust  estate  by  way  of  preference.  Held: 
These  judgments  will  be  set  aside  and  the  trust  fund  administered  for 
all  the  creditors  of  the  business.  A  trust  estate  embarked  in  trade  is 
liable  to  creditors  for  debt.  Woddrop  v.  Weed,  154  Pa.  St.  307,  312,  26 
Atl.  375. 

»  Sec  §  33. 

2  Campbell  v.  R.  R.,  1  Woods  368  (U.  S.)  (trustee  for  bondholders 
during  foreclosure  ])rocee(iing.s);  Ashuelot  R.  R.  v.  Elliott,  57  N.  H.  397 
(truHte(!  for  l)ondhold(a'8  in  possession);  AUison's  Estate,  183  Pa.  St. 
655  (assignee  for  creditors). 

160 


Chap.  Ill]  MUTUAL  OBLIGATIONS  [§  44 

gaged  property  at  foreclosure  sale  to  protect  the  inter- 
ests of  the  bondholders  and  reselling  it,  although  the 
mortgage  did  not  contain  the  usual  provision  author- 
izing him  to  do  so,^  but  subject  to  the  right  of  the 
bondholders  to  hold  him  accountable  for  negligence  in 
reselling  at  a  loss.*  The  fact  that  one  of  the  voting 
trustees  is  an  officer  of  a  railroad  with  which  he  votes 
to  consolidate  does  not  render  his  vote  illegal  in  the 
absence  of  proof  of  unfair  terms.^  On  the  other  hand,  a 
holder  of  voting  trust  certificates  has  been  allowed  to 
enjoin  the  trustee  from  voting  to  increase  the  number 
of  directors.*'  A  trustee  is  liable  for  losses  due  to  failure 
to  use  the  care  of  an  ordinarily  prudent  man.^  The 
trust  deed  usually  contains  a  stipulation  that  the  trustee 
shall  be  liable  only  for  his  own  wilful  default  or  neg- 
lect. These  stipulations  have  been  held  vaUd,^  and  he 
has  been  held  not  liable  for  failure  to  act  through  mis- 
take or  misconception  of  his  duty.^  Wilful  default  by 
a  trustee  means  "intentionally  making  way  with  the 
trust  property,  and  a  wilful  neglect  means  such  reckless 

3  Nay  V.  Scranton  Trust  Co.,  240  Pa.  St.  500,  87  Atl.  843. 

4  Watson  V.  Scranton  Trust  Co.,  240  Pa.  St.  507,  87  Atl.  845. 

5  Dady  v.  Georgia,  112  Fed.  838. 

«  Byington  v.  Piazza,  115  N.  Y.  S.  918,  131  App.  Div.  895. 

7  Re  Leventritt,  58  N.  Y.  S.  256,  40  App.  Div.  429  (assignee  for 
creditors);  Wright's  Estate,  182  Pa.  St.  90,  38  Atl.  151  (ditto). 

*  Black  V.  Wiedersheim,  143  Fed.  359  (trustee  for  bondholders); 
Stratton  v.  European  Co.,  74  Me.  422  (ditto);  HoUister  v.  Stewart,  HI 
N.  Y.  644,  19  N.  E.  782  (ditto). 

By  certification  of  bonds  the  trustee  under  the  mortgage  merely 
identifies  them  and  does  not  increase  his  liability.  Bauerschmidt  v. 
Maryland  Trust  Co.,  89  Md.  507,  43  Atl.  790;  Tschetinian  v.  City 
Trust  Co.,  186  N.  Y.  432,  79  N.  E.  401.  See  Dunning  v.  Bates,  186 
Mass.  123,  71  N.  E.  309. 

Where  the  mortgage  provided  that  the  proceeds  of  the  bonds  were 
to  be  paid  out  only  on  a  certificate  and  no  express  stipulation  relieved 
the  trustee,  he  was  held  liable  to  bondholders  on  an  impUed  covenant 
to  see  that  the  proceeds  were  paid  out  only  on  such  certificate.  Rhine- 
lander  V.  Farmers  Co.,  172  N.  Y.  519,  65  N.  E.  499. 

^  Black  V.  Wiedersheim,  143  Fed.  359  (trustee  for  bondholders). 

161 


§  44]  TRUSTS  [Chap.  Ill 

indifference  to  true  interests  of  the  trust  as  to  amount 
to  or  partake  of  a  wilful  violation  of  duty.  The  differ- 
ence between  neglect  of  duty  by  a  trustee  and  a  wil- 
ful neglect  or  default  by  a  trustee  is  not  unlike  the  dif- 
ference between  the  liability  of  one  who  is  bound  to 
exercise  due  care  and  the  liability  of  the  owner  of  land 
to  a  trespasser."  ^°  A  trustee  is  not  liable  for  miscon- 
duct of  a  co-trustee  if  he  himself  is  blameless. ^^  It  is 
not  necessarily  negligent  to  allow  the  co-trustee  to 
handle  funds  alone/^  but  he  cannot  sleep  on  his  trust. ^^ 
The  beneficiary  is  entitled  to  information  at  reason- 
able times  as  to  the  trust  estate/^  and  to  accounts.^^ 
There  is  no  objection  to  the  trustee  being  also  inter- 
ested as  beneficiary  in  the  trust  estate.^®  A  voting 
trustee  may  sell  his  own  stock  and  that  is  not  a  ground 
for  obliging  him  to  distribute  the  trust  stock. ^^  The 
purchaser  of  voting  trust  certificates  may  compel  the 
transfer  of  stock  by  the  trustee.^^  But  a  claimant  of 
stock  deposited  by  another  cannot  compel  the  trustee 
to  surrender  it  until  the  trust  certificate  is  surrendered 
to  him.^^    Such  certificates  have  been  held  not  evidence 

10  Warren  v.  Pazolt,  203  Mass.  328,  347,  89  N.  E.  381.  As  to  what 
is  gross  negligence  of  trustee  for  bondholders  who  had  limited  his  lia- 
bility to  that,  see  Hunsberger  v.  Guaranty  Trust  Co.,  150  N.  Y.  S.  190, 
164  App.  Div.  740. 

•1  Colburn  v.  Grant,  181  U.  S.  601,  45  L.  ed.  1021,  21  S.  Ct.  737. 

12  Dyer  v.  Riley,  51  N.  J.  Eq.  124,  26  Atl.  327;  Purdy  v.  Lynch,  145 
N.  Y.  462,  40  N.  E.  232. 

»  Hobnes  v.  McDonald,  226  111.  169,  80  N.  E.  714. 

>"  Pcrrin  v.  Lepper,  72  Mich.  454,  543,  40  N.  W.  859;  Hancox  v. 
Wall,  28  Hun  214,  218;  Barbour  v.  Cununings,  2()  R.  1.  201,  58  Atl.  660. 

"-  Orr  V.  Yates,  209  111.  222,  239,  70  N.  E.  731. 

•»  II(!ard  V.  March,  12  Cush.  580. 

"  IlaineH  v.  Kindcrliook,  53  N.  Y.  S.  368,  33  App.  Div.  154. 

'«  BriH.scll  V.  Kii:ipp,  155  Fed.  809. 

A  purchascT  of  a  voting  trust  certificate  gave  it  to  the  vendor  to  get 
it  transferred.  lie  pledged  it  for  his  own  debt.  Held:  Valid  pledge. 
Union  Trust  Co.  v.  Oliver,  1  10  N.  Y.  S.  681,  155  App.  Div.  646. 

'»  Bean  /;.  American  L.  iV  T.  Co.,  122  N.  Y.  622,  26  N.  E.  11  (voting 
trust). 

102 


Chap.  Ill]  MUTUAL  OBLIGATIONS  [§  44 

of  a  debt  and  so  not  taxable  as  such.^"  A  transfer 
of  voting  trust  certificates  is  taxable  under  the  New 
York  statute. ^^ 

In  addition  to  the  right  of  a  trustee  to  indemnity 
against  the  trust  estate  already  referred  to,^^  the  trustee 
has  a  right  against  his  beneficiary  personally  for  indem- 
nity against  liabilities  incurred  by  him  arising  out  of  his 
ownership  of  the  trust  property,  such  as  a  liability  for 
assessments  on  shares  in  corporations  held  by  him  in 
trust  for  a  syndicate.-^  It  has  been  held,  however,  that 
a  beneficiary  was  not  bound  by  a  stipulation  in  the 
declaration  of  trust  obligating  her  to  reimburse  the 
trustee  for  certain  expenditures  unless  she  assented  to  it 
and  that  if  she  did  not  execute  the  declaration  of  trust 
she  might  show  by  oral  evidence  that  her  consent  was 
absolute  or  conditional,  that  is,  that  she  reserved  the 
right  to  withdraw.  If  she  assented  without  qualification 
she  could  not  afterward  annex  a  condition  to  her  assent 
without  the  consent  of  the  parties  interested. ^^  In  other 
words,  the  issue  in  this  case  was  not  whether  the  trustee 
had  a  right  of  indemnity  against  the  beneficiaries,  but 
who  were  the  beneficiaries. 

Although  a  court  of  equity  is  the  proper  tribunal  to 
adjust  the  mutual  rights  of  trustee  and  beneficiary, 
it  has  been  held  that  after  the  trust  has  been  terminated 
by  sale  of  the  trust  property  under  foreclosure  proceed- 
ings, the  trustee  may  bring  an  action  of  contract  at 
law  against  the  beneficiaries  on  an  express  agreement 
in  the  declaration  of  trust  by  the  beneficiaries  to  reim- 

20  Comm.  V.  Union  Co.,  192  Pa.  St.  607,  43  Atl.  1010. 

21  U.  S.  V.  State  of  N.  Y.,  208  N.  Y.  144,  101  N.  E.  783. 
^  §  43,  note  12  et  seq. 

23  Hardoon  v.  Belilios,  (1901)  A.  C.  118,  125.  See  §  64,  notes  2 
and  3. 

^  Cunniff  v.  McDonnell,  196  Mass.  7,  10,  81  N.  E.  879. 

163 


§  45]  TRUSTS  [Chap.  Ill 

burse  the  trustees  for  certain  expenses.^^  A  trustee  in 
most  of  the  United  States  is  entitled  to  receive  compen- 
sation for  his  services,-^  and  when  reasonably  neces- 
sary to  employ  counsel  and  pay  his  charges  out  of  the 
estate.^^ 

The  natm'e  of  the  interest  of  the  beneficiary  in  the 
trust  res  has  already  been  discussed.^^ 

§  45.  Representation  of  Beneficiaries  by  the  Trustee 

The  ordinary  rule  is  that  the  beneficiaries  must  be 
parties  to  all  suits  in  equity  affecting  the  trust/  but 
not  to  actions  at  law.^  The  trustee  may,  however,  be 
held  to  represent  the  beneficiaries  to  such  an  extent 
that  a  decree  against  him  will  bind  them  though  not 
formally  joined  as  parties.  *'  It  cannot  be  doubted  that 
under  some  circmnstances  a  trustee  may  represent  his 
beneficiaries  in  all  things  relating  to  their  common  in- 
terest in  the  trust  property.  He  may  be  invested  with 
such  powers  and  subjected  to  such  obligations  that 
those  for  whom  he  holds  will  be  bound  by  what  is  done 

25  Cunniff  v.  McDonneU,  196  Mass.  7,  10,  81  N.  E.  879. 

26  Barney  v.  Saunders,  16  How.  535,  542;  Barrell  v.  Joy,  16  Mass. 
221;  McDougal  v.  Fuller,  148  Cal.  521,  83  Pac.  701  (assignee  for  cred- 
itors); Re  Hulburt,  89  N.  Y.  259  (ditto);  Coleman's  Estate,  200  Pa.  St. 
29,  49  Atl.  798  (ditto). 

Contra.  In  England,  Re  Pooley,  40  Ch.  D.  1,  and  in  Delaware  State 
V.  Piatt,  4  Harr.  154. 

A  committee  of  creditors  managing  a  business  in  the  hands  of  trus- 
tees under  an  insolvent  assignment,  were  entitled  to  sue  the  creditors 
for  compensation  for  their  services.  Bingaman  v.  Hickman,  115  Pa. 
St.  420,  8  Atl.  644. 

"  Tcague  v.  Corbitt,  57  Ala.  529;  National  Bank  v.  Dulaney,  96 
Md.  159,  171,  53  Atl.  944  (assignee  for  creditors);  Foi-wardi*.  Allen, 
0  Allen  494,  497;  Berkeley  v.  Green,  102  Va.  378,  381,  46  S.  E.  387  (as- 
Hignc(!  for  cnxlitors). 

2"  See  §  21. 

•  Zehnbar  v.  Spillman,  25  Fla.  591,  598,  6  So.  214;  McGraw  v.  Bay- 
ard, 06  111.  146,  153. 

2  Clieutham  v.  Rowland,  92  N.  C.  340. 

164 


Chap.  Ill]      REPRESENTATION   OF   BENEFICIARIES      [§  45 

against  him  as  well  as  what  is  done  by  him.  The  diffi- 
culty lies  in  ascertaining  whether  he  occupies  such  a 
position,  not  in  determining  its  effect  if  he  does.  If 
he  has  been  made  such  a  representative,  it  is  well 
settled  that  his  beneficiaries  are  not  necessary  parties  to 
a  suit  by  him  against  a  stranger  or  to  one  by  a  stran- 
ger against  him  to  defeat  it  in  whole  or  in  part."  ^  The 
beneficiaries  are  then  bound  by  the  judgment  against 
the  trustee  in  the  absence  of  fraud  or  collusion.'*  The 
court,  of  course,  may  in  its  discretion  join  the  benefici- 
aries as  parties.''  The  Federal  courts  obtain  jurisdiction 
through  diverse  citizenship  of  the  trustee  though  the 
beneficiary  is  a  resident  of  the  same  State  with  the  ad- 
verse party.*'  The  trustee  under  the  usual  form  of  mort- 
gage to  secure  bondholders  in  many  respects  is  the 
representative  of  his  beneficiaries.  Thus  notice  to  him 
of  the  existence  of  a  prior  encumbrance  on  the  property 
mortgaged  has  been  held  to  be  notice  to  the  bond- 
holders.'^ The  trustee  is  the  appropriate  party  to  fore- 
close the  mortgage.^    He  cannot  delegate  this  duty  to 

'  "From  this  it  appears  that  he  was  not  only  invested  with  the  legal 
title  to  the  property,  but  that  all  parties  relied  upon  his  judgment  and 
discretion  for  the  protection  of  their  respective  interests.  A  clear  in- 
tent is  manifested  of  relieving  the  creditors  from  the  necessity  of  look- 
ing personally  to  the  conversion  of  the  securities  or  to  the  preservation 
of  the  trust."  Trust  of  certain  land  for  the  benefit  of  creditors.  Kerri- 
son  V.  Stewart,  93  U.  S.  155,  160,  161,  23  L.  ed.  843;  Cheatham  v.  Row- 
land, 92  N.  C.  340,  343;  see  Winslow  v.  Minn.,  etc.  R.  R.,  4  Minn.  313, 
317. 

*  Kerrison  v.  Stewart,  93  U.  S.  155,  160,  23  L.  ed.  843. 

5  Francis  v.  Harrison,  43  Ch.  D.  183. 

«  Dodge  V.  TuUeys,  144  U.  S.  451,  456,  36  L.  ed.  501,  12  S.  Ct.  728. 

Jurisdiction  was  denied  where  the  beneficiary  was  a  non-resident, 
but  the  trustee  resided  in  the  same  State  as  the  other  party.  All  the 
trustees  must  be  non-resident.    Shipp  v.  Wilhams,  62  Fed.  4. 

7  Coe  V.  N.  J.  R.  R.  Co.,  31  N.  J.  Eq.  105;  MiUer  v.  Rutland  Co.,  36 
Vt.  452,  484;  Fidelity  Co.  v.  Shenandoah  Co.,  32  W.  Va.  244,  9  S.  E. 
180.  But  see  Johnson  County  v.  Thayer,  94  U.  S.  631,  24  L.  ed.  133; 
Curtis  V.  Leavitt,  15  N.  Y.  9,  194,  195. 

8  Consohdated  Water  Co.  v.  San  Diego,  89  Fed.  272;  Shaw  v.  Nor- 

165 


§  45]  TRUSTS  [Chap.  Ill 

the  holders  of  a  majority  of  the  bonds  and  is  Hable  to  a 
minority  for  damages  sustained  by  such  a  course.^ 
But  if  he  has  a  discretion  as  to  action  or  not,  he  may 
properly  follow  the  desires  of  holders  of  a  majority  of 
bonds  acting  in  good  faith. ^'^  In  a  foreclosure  suit  by 
the  trustee  the  corporation  cannot  set  off  a  claim  against 
the  individual  bondholder. ^^  Bondholders  can  proceed 
themselves  against  the  mortgagor  to  protect  the  trust 
estate  only  if  redress  cannot  be  obtained  through  the 
trustee. ^^  Thus  it  is  held  that  if  the  trustee  refuses  or 
unreasonably  neglects  to  act,  bondholders  may  proceed 
independently  after  request  to  the  trustee,^^  or  they  may 
proceed  against  the  trustee  and  compel  him  to  act.^* 
When  by  the  terms  of  the  mortgage  the  trustee  is  en- 
titled to  indemnity  against  loss  or  expense  before  he 
can  be  compelled  to  act,  and  refuses  to  proceed  without 

folk  County  R.  R.  Co.,  5  Gray  162;  Virginia  Co.  v.  Fisher,  104  Va.  121, 
51  S.  E.  198;  Re  Chickering,  56  Vt.  82. 

Contra.  Bondholders  necessary  parties.  Tyson  v.  Applegate,  40 
N.  J.  Eq.  305;  Davis  v.  Hemingway,  29  Vt.  438;  Day  v.  Wetherby, 
29  Wis.  363. 

Bondholders  may  be  admitted  in  the  discretion  of  the  court.  Fink 
V.  Bay  Shore  Co.,  144  Fed,  837. 

Failure  of  the  trustee  to  contest  a  prior  mortgage  may  be  sufficient. 
Met.  Trust  Co.  v.  Central  Trust  Co.,  93  C.  C.  A.  671,  168  Fed.  1021. 

9  Merrill  v.  Farmers  Co.,  24  Hun  297. 

'0  First  Bank  v.  Shedd,  121  U.  S.  74,  30  L.  ed.  877,  7  S.  Ct.  807;  State 
V.  Brown,  73  Md.  484,  21  Atl.  374. 

11  Dickerman  v.  Northern  Trust  Co.,  176  U.  S.  181,  44  L.  ed.  423,  20 
S.  Ct.  311. 

"  Bill  by  bondholders  on  behalf  of  all  others  against  the  trustees 
under  the  mortgage  and  directors  of  the  corporation  for  allowing  lessees 
of  the  corporation's  mine  to  waste  it.  Held:  Bondholders  can  proceed 
themselves  only  if  redress  cannot  be  obtained  through  the  trustee. 
Negligence  of  (he  trustees  is  not  enough.  Directors  of  the  corporation 
owe  no  fidu(;iary  obligation  to  the  bondholders.  Young  v.  Haviland, 
215  Mass.  120,  123,  102  N.  E.  338. 

»  Wel)b  V.  Vt.  Cent.  Ry.  Co.,  9  Fed.  793;  Siebert  v.  Minn.  Co.,  52 
Minn.  148,  .'">3  N.  \V.  1134;  Schultze  v.  Van  Doren,  65  N.  J.  Eq.  764,  55 
Atl.  1 133;  O'Bcirne  v.  Allegheny  Co.,  151  N.  Y.  372,  45  N.  E.  873.  See 
Citizens  Bank  v.  Los  Angehis  Co.,  131  Cal.  187,  63  Pac.  462. 

"  First  Nat.  Co.  v.  Salisbury,  130  Mass.  303. 

IGG 


Chap.  Ill]     MANAGEMENT   OF  TRUST   ESTATE  [§  46 

it,  the  bondholders  must  furnish  it  before  they  are  en- 
titled to  act  independently.^^  When,  however,  the 
trustee  has  taken  a  position  where  his  interest  conflicts 
with  his  duty  as  trustee,  no  request  is  needed,^^  and  so 
when  for  any  other  reason  an  appeal  to  the  trustee 
would  obviously  be  useless.^^ 

§  46.  Management  of  Trust  Estate 

Courts  will  not  interfere  with  the  directions  pre- 
scribed in  the  trust  deed  for  the  management  and  con- 
trol of  the  trust  ^  unless  the  preservation  of  the  estate 
requires  it.^  The  trustee  cannot  delegate  his  authority,^ 
but,  of  course,  may  appoint  agents  to  perform  purely 
ministerial  functions.'*  In  the  absence  of  any  provi- 
sions to  the  contrary  in  the  trust  instrument,  the  trus- 
tees must  act  jointly  in  matters  involving  the  exercise 
of  their  discretion.^     In  purely  ministerial  matters  or 

15  Falmouth  Bank  v.  Cape  Cod  Co.,  166  Mass.  550,  44  N.  E. 
617. 

1*  American  Co.  v.  Kentucky  Co.,  51  Fed.  826. 

"  Wheelwright  v.  St.  Louis  Co.,  56  Fed.  164  (office  vacant);  Ett- 
linger  v.  Persian  Co.,  142  N.  Y.  189,  36  N.  E.  1055. 

In  California  it  is  held  that  when  the  trustee  need  act  only  at  the  re- 
quest of  holders  of  a  majority  of  bonds  and  is  therefore  justified  in  re- 
fusing to  act,  a  minority  may  proceed  directly.  Citizens  Bank  v.  Los 
Angeles,  131  Cal.  187,  63  Pac.  462.  See  Western  Penn.  Hospital  v. 
Mercantile  Co.,  189  Pa.  St.  269,  42  Atl.  183. 

For  an  unusual  form  of  trust  certificate  in  which  the  same  rule  was 
apphed,  see  Land  Title  &  Trust  Co.  v.  Asphalt  Co.,  127  Fed.  1;  Land 
Title  &  Trust  Co.  v.  Tatnell,  132  Fed.  305. 

Bondholders  were  allowed  to  intervene  in  a  receivership  without 
joining  the  trustee  when  he  was  out  of  the  jurisdiction.  Anthony  v. 
Campbell,  112  Fed.  212. 

1  Winthrop  y.  Attorney  General,  128  Mass.  258  ;•  Pennington  w.  Met. 
Museum  of  Art,  65  N.  J.  Eq.  11,  23,  55  Atl.  468. 

2  Johns  V.  Johns,  172  111.  472,  50  N.  E.  337. 
»  Suarez  v.  Pumpelly,  2  Sandf.  Ch.  336,  340. 

*  Spenglar  v.  Kuhn,  212  111.  186,  72  N.  E.  214;  Donaldson  v.  Allen, 
182  Mo.  626,  81  S.  W.  1151. 

*  Hosch  Lumber  Co.  v.  Weeks,  123  Ga.  336,  51  S.  E.  439;  Coleman 
V.  ConnoUy,  242  lU.  574,  90  N.  E.  278. 

167 


§  46]  TRUSTS  [Chap.  Ill 

in  an  emergency,  to  preserve  the  fund,  one  may  act 
alone. ^  Courts  uphold  stipulations  in  the  trust  deed 
giving  a  majority  of  the  trustees  or  less  than  all  the 
power  to  act  even  in  matters  involving  discretion,'  but 
even  in  such  cases  it  has  been  held  that  those  not  acting 
are  entitled  to  notice  of  the  contemplated  action  and  an 
opportunity  to  be  heard. ^  A  trustee  has  the  right  under 
certain  circiunstances  to  seek  the  advice  of  a  court  of 
equity  as  to  his  rights  and  obligations  in  advance  of 
acting.^  This  is  not,  however,  a  means  whereby  the 
trustee  can  relieve  himself  of  the  entire  burden  of 
managing  the  trust.  The  requisites  for  a  bill  for 
instructions  have  been  said  to  be  ''the  possession  of 
a  fiduciary  fund  of  which  some  disposition  is  neces- 
sarily to  be  made  presently;  conflicting  claims  or 
the  probability^  thereof;  and  the  existence  of  no  other 
means  of  determining  rights  or  demands  so  as  to 
protect  a  trustee  from  the  risks  of  future  liability 
or  controversy."  ^°  A  decree  on  such  a  petition  for 
instructions,  when  the  beneficiaries  are  parties,  is  res 
judicata  as  to  them,  if  they  later  try  to  make  the 
trustee  account  on  a  different  basis. ^^  A  trustee  may 
transact  business  in  other   States  under  the  protec- 

^  Vandever's  Appeal,  5  Watts  &  G.  405. 

■'  Duckworth  v.  Ocean  Co.,  98  Ga.  193,  26  S.  E.  736;  Barney  v.  Chit- 
tendon,  2  G.  Greene  165  (la.);   Ratcliffe  v.  Sangston,  18  Md.  383,  389. 

8  Loud  V.  Winchester,  52  Mich.  174,  185,  17  N.  W.  784  (trust  for 
creditors);    Heard  v.  March,  66  Mass.  580,  584. 

Of  course  an  act  by  one  trustee  in  the  name  of  both  may  be  ratified 
by  the  other.    Ubhoff  v.  Brandenburg,  26  App.  D.  C.  13. 

»  Diggs  V.  Fidehty  Co.,  112  Md.  50,  75  Atl.  517;  Chase  v.  Ladd,  155 
Ma.sH.  417,  29  N.  E.  637;  Hoagland  v.  Cooper,  65  N.  J.  Eq.  407,  56  Atl. 
705. 

'»  Bullard  v.  Attorney  General,  1.53  Mass.  249,  26  N.  E.  691.  See 
Hewitt  V.  Green,  77  N.  .J.  Kq.  345,  77  Atl.  25. 

»  Thorn  v.  De  Hrcteuil,  179  N.  Y.  ()4,  79,  8.5,  71  N.  E.  470  (here 
Bomc  of  the  beneficiaries  were  infants,  but  the  court  said  they  had  been 
HufTiciently  represented  by  the  adults). 

168 


Chap.  Ill]  CHANGE   OF  TRUSTEE  [§  47 

tion  of  the  Constitution  of  the  United  States  and  a 
statute  purporting  to  prohibit  the  transfer  of  any  real 
or  personal  property  in  Indiana  to  a  non-resident  trus- 
tee except  by  will  was  held  unconstitutional.^^ 

§  47.   Change  of  Trustee 

A  court  of  equity  can  always  remove  a  trustee  for 
cause. ^  Assignees  for  the  benefit  of  creditors  have  been 
removed  for  misconduct  and  incapacity  and  a  successor 
appointed  on  petition  of  creditors  for  whose  benefit  the 
assignment  was  made.^  Trustees  under  mortgages 
securing  bonds  have  been  removed  because  of  residence 
in  a  State  at  war  with  that  in  which  the  trust  is  being 
administered,^  and  even  for  removal  of  residence  to  a 
foreign  country,^  but  not  for  mere  temporary  absence.^ 
A  trustee  of  a  voting  trust  has  been  removed  for  electing 
himself  as  officer  at  an  excessive  salary  and  he  has  been 
made  to  account  for  the  salary.*^  The  legislature  can- 
not by  statute  substitute  a  new  trustee,  for  that  would 
impair  the  obligation  of  contract.^  Where  the  trust 
deed  itself  provides  for  the  removal  of  a  trustee  and  ap- 
pointment of  his  successor,  the  beneficiaries  may  remove 

12  Roby  V.  Smith,  131  Ind.  342,  30  N.  E.  1093;  Shirk  v.  Lafayette, 
52  Fed.  855;  Farmers  Co.  v.  Chicago,  27  Fed.  146,  149. 

1  May  V.  May,  167  U.  S.  310,  42  L.  ed.  179,  17  S.  Ct.  824. 

2  Haven  v.  Sibbald,  41  Atl.  371  (N.  J.);  Bryson  v.  Wood,  187  Pa. 
St.  366,  41  Atl.  473;  Estate  of  Ahl,  192  Pa.  St.  370,  43  Atl.  956;  Taylor 
V.  Mahoney,  94  Va.  508,  27  S.  E.  107;  Morgan  v.  South  Co.,  100  Wis. 
465,  76  N.  W.  354;  State  v.  Johnson,  105  Wis.  164,  178,  83  N.  W. 
320. 

3  Ketcham  v.  Mobile,  etc.  Co.,  2  Woods  532  (U.  S.). 
*  Farmers  Co.  v.  Hughes,  11  Hun  130. 

5  Equitable  Co.  v.  Fisher,  106  111.  189. 

6  Ehas  V.  Schweiger,  50  N.  Y.  S.  180,  27  App.  Div.  69.  See  Lawrence 
V.  Curtis,  191  Mass.  240,  77  N.  E.  314;  Barbour  v.  Weld,  201  Mass.  513, 
87  N.  E.  909. 

'  Trustee  under  mortgage  securing  bonds.  Knapp  v.  R.  R.  Co.,  20 
WaU.  117,  122;  Fletcher  v.  Rutland  Co.,  39  Vt.  633. 

169 


>{ 


§  47]  TRUSTS  [Chap.  Ill 

him  so  long  as  they  act  in  good  faith.  ^  Its  provisions 
should  be  strictly  followed  or  the  acts  of  the  successor 
may  be  held  invalid.^  A  voting  trustee  resigned  and  a 
new  one  was  substituted  in  accordance  with  the  terms 
of  the  trust  deed.  There  was  litigation  as  to  some  stock 
and  the  trustee  wished  to  be  fully  protected.  He  was 
allowed  to  file  a  bill  in  equity  to  have  the  court  accept 
his  resignation,  pass  on  his  accounts  and  appoint  his 
successor. ^'^  So  an  assignee  for  the  benefit  of  creditors 
may  be  permitted  by  the  court  to  resign."  A  new 
trustee  may  be  appointed  where  a  vacancy  exists  from 
any  of  the  usual  causes. ^^ 

8  May  V.  May,  167  U.  S.  310,  42  L.  ed.  179,  17  S.  Ct.  824;  March  v. 
Romare,  116  Fed.  355  (C.  C.  A.). 

9  Farmer's  Co.  v.  Chicago,  27  Fed.  146;  Equitable  Co.  v.  Fisher,  106 
111.  189;  Richards  v.  Merrimack  Co.,  44  N.  H.  122.  See  Shaw  v.  Norfolk 
County  R.  R.  Co.,  5  Gray  162. 

10  Moore  Co.  v.  National  Sav.  Co.,  218  U.  S.  422,  54  L.  ed.  1093, 
31  S.  Ct.  64. 

11  Andrews  v.  Wilson,  114  Ky.  671,  71  S.  W.  890. 

12  Brown  v.  Parker,  97  Fed.  446  (assignee  for  creditors);  Claflin  Co. 
V.  Middlesex  Co.,  113  Fed.  958  (ditto);  Tuttle  v.  Merchants  Bank,  19 
Mont.  11  (ditto);  Rogers  v.  PeU,  166  N.  Y.  565,  60  N.  E.  265  (ditto). 


170 


CHAPTER  IV 

UNASSOCIATED  GROUPS 

§  48.  In  General 

There  are  numerous  instances  of  groups  of  individ- 
uals engaged  in  business  which  do  not  fall  in  either  of 
the  classifications  yet  discussed,  that  is,  they  are 
neither  partnerships  nor  trusts.  It  is  important,  how- 
ever, for  purposes  of  comparison  with  true  associations 
to  illustrate  briefly  the  nature  of  these  groups.  They 
take  a  great  variety  of  forms  but  involve  only  an  appli- 
cation of  the  law  of  agency. 

§  49,  Lloyd's  Insurance 

In  some  jurisdictions  it  is  still  common  to  carry  on 
the  business  of  insurance  in  an  ancient  form  which  is 
known  as  Lloyd's.  To  some  extent  such  insurance  has 
been  regulated  by  statute.  The  policy  varies  from  the 
usual  form  in  that  it  is  made  not  by  a  single  insurer,  but 
by  a  group  of  insurers  who  expressly  contract,  not  as 
partners,  but  as  individuals,  and  who  undertake  to  be 
liable  only  each  for  his  own  pro  rata  share  of  the  loss. 
They  act  through  a  designated  agent  upon  whom  it  is 
agreed  process  may  be  served  which  shall  be  binding 
upon  all  insurers.  Their  transactions  are  of  such  a 
nature  that  the  question  whether  they  are  partnerships 
or  not  has  seldom  been  expressly  decided,  the  court 
having  simply  to  determine  whether  their  obligation 
was  joint  or  not.    In  several  cases  they  are  described 

171 


§  49],  UNASSOCIATED   GROUPS  [Chap.  IV 

simply  as  associations,  or  are  said  to  fall  within  the 
description  of  statutes  restricting  the  right  of  foreign 
associations  to  transact  business  in  that  State, 

A  Lloyd's  insurance  association  which  had  been  peti- 
tioned into  involuntary  bankruptcy  claimed  that  a 
petition  could  not  be  filed  against  it  as  a  separate  entity, 
but  only  against  the  individual  members  as  partners. 
The  policies  issued  expressly  made  the  liability  of  the 
underwriters  several  and  not  joint,  "as  though  each 
under-^Titer  had  issued  a  separate  and  individual 
policy."  The  business  was  conducted  by  managers, 
but  it  was  organized  under  articles  of  association,  its 
members  held  meetings  and  did  business  and  issued 
policies  in  its.  company  name,  viz.,  Seaboard  Fire 
Underwriters.  The  court  held  that  the  United 
States  Bankruptcy  Act  specifies  "any  unincorporated 
company"  as  well  as  person  and  corporation  as  sub- 
ject to  involuntary  bankruptcy  and  that  this  was 
an  unincorporated  company  within  the  meaning  of 
the  act.^ 

A  statute  authorized  quo  warranto  against  "an  asso- 
ciation of  persons  acting  as  a  corporation  within  the 
State  without  being  legally  incorporated."  The  court 
held  that  this  applied  to  a  foreign  fire  Lloyd's  associa- 
tion issuing  policies  in  the  State  because  they  professed 
to  limit  their  liability  to  the  amount  of  money  contrib- 
uted by  each  and  assumed  to  give  perpetuity  to  the 
business  by  making  membership  certificates  transfer- 
able. The  fact  that  they  might  be  held  individually 
liable,  the  court  said,  did  not  relieve  them  of  the 
charge  of  having  tried  to  act  as  a  corporation.  They 
were  an  association  because  they  acted  under  a  com- 

»  Re  Seaboard  Fire  Underwi-itcrs,  137  Fed.  987  (D.  C.  —  N.  Y.). 

172 


Chap.  IV]  LLOYD'S   INSURANCE  [§  49 

pany  name,  viz.,  "  Guarantee  and  Accident  Lloyds,  New 
York,"  and  the  subscribers  chose  an  advisory  committee 
who  controlled  the  capital  like  a  board  of  directors  and 
executed  a  power  of  attorney  to  the  same  individual  to 
manage  the  business.^ 

On  a  petition  for  license  to  engage  in  the  insurance 
business  the  Alabama  court  said:  "According  to  the 
showing  made  by  i  the  petition  the  business  was  to  be 
carried  on  in  the  manner  of  the  ancient  Lloyds.  The 
respective  liabilities  and  limitations  of  liability  of  the 
individual  members  to  each  other  .  .  .  are  such  that 
the  business  of  insurance  thus  carried  on  may  be  in- 
cluded within  the  scope  of  the  term  'Company,'  'asso- 
ciation,' or  'individual.'  Each  underwriter  is  individu- 
ally liable  for  a  fixed  amount,  but  not  for  the  whole  or 
for  any  part  of  another  underwriter's  liability,  yet  all 
act  together  to  effect  the  contract  of  insurance.  In 
the  former  respect  it  is  an  individual  undertaking  which 
becomes  binding  by  the  separate  action  of  all.  In  the 
latter  respect  the  policy  is  also  the  contract  of  a  '  com- 
pany'  or  '  association.'  It  is  not  a  partnership  in  a  legal 
sense  and  in  no  sense  can  it  be  considered  a  corpora- 
tion. It  is  an  association  or  company  of  individuals 
organized  to  do  an  insurance  business  upon  certain 
stipulations  and  conditions  evidenced  by  their  written 
agreement."  The  Alabama  statute  requiring  sta,te- 
ments,  etc.,  from  foreign  companies  did  not  apply  to 
any  but  corporations.  Hence  the  plaintiff  was  held 
entitled  to  his  license.^ 

2  State  V.  Ackerman,  51  Ohio  St.  163,  196,  198,  87  N.  E.  828;  ace. 
Greene  v.  People,  150  111.  513,  21  N.  E.  605. 

3  Hoadley  v.  Purifoy,  107  Ala.  276,  289,  18  So.  220. 

The  Georgia  statute  forbidding  insurance  companies  to  transact 
business  in  the  State  without  a  hcense  was  construed  as  applicable  only 
to  corporations.     Hence  the  agent  of  "the  Guarantee  and  Accident 

173 


§  49]  UNASSOCIATED   GROUPS  [Chap.  IV 

In  these  cases  and  in  some  others  they  have  been 
organized  under  agreements  which  provide  for  asso- 
ciation in  a  common  enterprise  in  a  way  that  should 
properly  be  held  a  partnership.  A  certificate  was  is- 
sued by  the  Buffalo  Fke  and  Marine  Underwriters  in- 
suring "subject  to  the  conditions  of  open  policy  No.  — 
at  the  Buffalo  Agency."  ''Valid  when  countersigned 
by  the  authorized  agent  of  the  Company  at  Buffalo." 
The  open  policy  in  fact  was  a  Lloyd's  policy  of  nineteen 
underwriters.  The  certificate  was  issued  in  Ohio. 
The  New  York  Com-t  of  Appeals  held  that  the  New 
York  law  forbade  doing  business  under  a  fictitious  name 
and  that  the  defendant  underwriters  were  liable  as  a 
company  since  they  called  themselves  such  in  the  cer- 
tificate and  an  association  in  their  articles.  It  further 
held  that  if  it  were  deemed  a  company  with  limited 
liability  this  notice  of  lunitation  of  liability  was  in- 
sufficient. ''This  company  or  association  was  not  in- 
corporated, was  in  no  wise  exempted  by  law  from  part- 
nership liability,  except  as  it  should  in  its  agreement 
with  the  insured  actually  and  expUcitly  so  exempt  it- 
self.   This  does  not  mean  that  seemingly  constructive 

Lloyds"  which  the  court  said  was  "a  voluntary  unincorporated  associa- 
tion consisting  of  one  hundred  natural  persons"  was  not  Hable  for  the 
penalty.    Fort  v.  State,  92  Ga.  8,  13,  18  S.  E.  14. 

An  insurance  scheme  whereby  the  insured  paid  premiums  to  an  at- 
torney in  fact  in  Kansas  City,  who  after  deducting  twenty-five  per  cent. 
for  his  services  and  expenses  used  the  rest  as  a  mutual  insurance  fund 
for  the  policy  holders  called  the  Manufacturing  Lumberman's  Under- 
writers, was  h(!ld  to  be  an  association  transacting  the  business  of  insur- 
ance in  Mississippi  and  subject  to  the  laws  regulating  insurance.  The 
statute  exj)ressly  included  associations.  State  v.  Alley,  9G  Miss.  720, 
7G0,  .51  So.  4()7. 

Statute  of  Missouri  construed  to  prohibit  transacting  business  of 
insurance  by  individuals  oi-  imincoi7)orated  associations  as  well  as  cor- 
porations without  compliance!  with  its  ])rovisi(ms.  State  can  regulate 
this  buHJncHH  if  no  discrimination  between  individuals.  Hence  the  agent 
of  a  New  York  Lloyds  was  subject  to  the  statute.  State  v.  Stone,  118 
Mo.  388,  24  S.  W.  164. 

174 


Chap.  IV]  LLOYD'S   INSURANCE  [§  49 

notice  which  is  so  contrived  and  intended  as  to  be 
hidden  in  the  letter  and  not  to  be  perceived  or  suggested 
until  searched  out  of  its  lurking  place  after  a  loss.  It 
means  a  notice  so  plain  and  fair  that  the  party  to  be 
charged  with  it  either  receives  it  or  it  is  his  own  fault 
if  he  does  not."  But  an  underwriter  whose  name 
was  printed  in  the  policy  was  not  liable  because  he 
notified  the  attorney  that  he  retired  before  this  policy 
was  issued.  He  never  attended  any  meetings.  Al- 
though he  did  not  recall  the  power  of  attorney  or  pub- 
lish notice,  plaintiff  did  not  know  he  ever  had  been  a 
member  of  the  association  and  was  not  misled.^  In 
other  cases  where  the  nature  of  Lloyd's  groups  was  in 
question  the  courts  have  treated  them  not  as  associa- 
tions but  as  liabilities  in  severalty.^    In  still  other  cases 

*  Imperial  Shale  Brick  Co.  v.  Jewett,  169  N.  Y.  143,  150,  62  N.  E. 
167,  169. 

A  statute  imposed  an  assessment  on  premiums  in  favor  of  the  plain- 
tiff who  sued  the  attorney  of  a  Lloyds  on  the  theory  that  he  was  the 
treasurer  of  an  unincorporated  association  of  over  seven  members  who  by 
another  statute  could  be  sued  in  that  way.  Held :  Though  the  Lloyds' 
policy  is  one  of  individual  habiUty  the  members  are  an  association  and 
act  as  such  in  issuing  the  pohcies  and  collecting  the  premiums  which 
belong  to  the  association.  The  attorney  performs  the  functions  of  a 
treasm-er  and  so  can  be  sued  under  the  statute,  there  being  no  formal 
treasurer  or  president.  N.  Y.  Board  of  Fire  Underwriters  v.  ^Vhipple, 
65  N.  Y.  S.  188,  36  App.  Div.  49. 

A  Lloyds  reinsured  its  risks  with  the  defendant.  The  contract  was 
made  in  the  name  under  which  they  were  doing  business,  viz.,  "Indi- 
vidual Underwriters  at  Commercial  Lloyds."  The  plaintiff,  one  of  the 
underwriters  having  paid  losses,  brought  an  action  against  the  defend- 
ant on  the  contract.  Held:  Cannot  be  maintained  without  joining  all 
members  of  the  association.  The  contract  was  made  "not  with  the  in- 
dividual members  composing  the  association  but  with  the  association 
itself."  It  is  a  joint  obhgation.  Thompson  v.  Colonial  Assurance  Co., 
70  N.  Y.  S.  85,  60  App.  Div.  325. 

*  A  State  cannot  impose  restrictions  on  citizens  of  another 
State  doing  business  in  it  which  it  does  not  apply  to  its  own  citi- 
zens. At  common  law  an  individual  can  write  insurance  and  no 
statute  of  lUinois  forbids.  If  the  requirements  imposed  on  foreign 
corporations  are  meant  to  be  applicable  to  individuals,  they  are 
unconstitutional.  Hence  the  agent  of  a  New  York  Fire  Lloyds  was 
not  hable  to  the  penalty.    Barnes  v.   People,    168  lU.  425,  429,   48 

175 


§  49]  UNASSOCIATED  GROUPS  [Chap.  IV 

no  inference  can  be  drawn  from  the  decision  as  to  the 
attitude  of  the  court  on  this  point. ^    It  should  be  noted, 

N.  E.  91.  See  Warfield-HoweU  Co.  v.  WilHamson,  233  111.  487,  495, 
84  N.  E.  706. 

"Of  course  the  underwriters  do  not  constitute  a  joint  stock  company 
or  association."  Gough  v.  Satterlee,  52  N.  Y.  S.  492,  497,  32  App.  Div. 
33. 

Action  against  members  of  several  Lloyds  companies  for  services 
rendered  apparently  in  connection  with  litigation.  Held:  Not  sufficient 
evidence  of  authority  of  general  manager  to  bind  the  defendant.  The 
power  of  attorney  should  be  produced  or  its  loss  proved  as  preliminary 
to  secondary  evidence  of  its  contents.  It  should  also  appear  that  de- 
fendant was  an  underwTiter  on  each  pohcy  with  respect  to  which  plain- 
tiff performed  services.  Langbein  v.  Tongue,  54  N.  Y.  S.  145,  25  Misc. 
757. 

A  statute  forbidding  acting  as  agent  of  a  foreign  insm-ance  company 
without  a  license  did  not  apply  to  the  agent  of  a  Lloj-ds  because  the 
statute  applies  only  to  agents  of  coi-porations.  "The  pohcy  in  question 
was  undoubtedly  a  pohcy  executed  by  one  himdi'ed  indi\'idual  persons 
and  contracting  for  individual  habilitj'  of  all."  Comin.  v.  Reinoehl,  163 
Pa.  St.  283,  290,  29  Atl.  896. 

No  action  can  be  brought  on  a  Lloyds  pohcy  since  insurance  b}^  indi- 
viduals is  forbidden  by  statute  in  Pennsylvania.  \Yeed  v.  Cimiing,  12 
Perm.  Super.  Ct.  Rep.  412,  416. 

A  Lloj'ds  pohcy  subscribed  by  "The  Shipowners'  SjTidicate  (Re-as- 
sured) John  ]M.  Corderoy,  Manager,"  followed  by  the  names  of  individ- 
uals with  the  proportion  of  the  insm'ance  effected  by  each  indicated  after 
his  name  contained  a  clause,  "It  is  specially  agreed  that  the  assured  are 
hereby  entitled,  by  way  of  further  security  for  the  performance  of  the 
obUgations  of  the  subscribing  underwTiters  and  of  each  and  every  of 
them,  to  the  benefit  by  way  of  first  charge  of  the  pohcies  of  re-insurance 
effected  or  to  be  effected  and  of  all  moneys  received  thereunder." 
Held:  The  several  liabihty  usually  resulting  from  this  form  of  pohcy  was 
not  enlarged  by  this  clause  which  seems  to  have  been  intended  to  pre- 
vent the  loss  of  the  security  by  insolvency  of  any  of  the  undei^nTiters. 
It  was  contended  that  the  word  "sjmdicate"  imported  acting  together 
and  meant  something  equivalent  to  firm  or  partnership.  But  the  court 
said  "the  word  'sjTidicate'  does  not  indicate  in  what  waj^  the  members 
are  acting  together."  Tyser  v.  Shipowners'  SjTidicate,  (1896)  1  Q.  B.  D. 
135. 

•  An  action  was  brought  "against  the  members  of  a  Lloyds  insurance 
association  composed  of  individuals  residing  for  the  most  part  in  Canada 
and  known  as  the  New  York  Commercial  Underwriters  on  a  policy  of 
in.surancf'  against  perils  of  the  sea."  The  individual  underwriters 
insured  "joint  ly  and  soverallj'."  Held :  The  declaration  was  not  demur- 
rable because  somo  of  tiie  defendants  named  were  out  of  the  jurisdic- 
tion and  could  not  be  served.  Richmond  Cedar  Works  v.  Buckner,  181 
Fed.  424  (C.  C.  —  N.  Y.). 

A  Florida  statute  imposing  conditions  on  foreign  unincorporated  as- 
sociations and  individually  issuing  poUcies  in  that  State  wliich  were  not 

17G 


Chap.  IV]  LLOYD'S   INSURANCE  [§-49 

however,  that  even  the  cases  that  call  the  underwriters 
an  association  usually  recognize  that  their  liability  as 
insurers  is  several  and  not  as  partners.  In  other  words, 
in  the  only  business  they  intend  to  transact  they  do  not 
act  as  associates  but  as  unassociated  individuals.  There 
should  be  no  difficulty,  therefore,  in  so  drawing  their 
organization  agreement  that  no  association  will  result 
from  their  activities  and  in  the  normal  case  they  will 
be  simply  a  group  of  independent  contractors  acting 
through  a  conunon  agent. 

It  is  usually  provided  in  these  policies  that  no  ac- 
tion shall  be  brought  on  it  except  against  the  manager 
as  attorney  in  fact  representing  all  the  underwriters  and 
each  underwriter  agrees  to  abide  by  the  result  of  such 
action  as  fixing  his  individual  responsibility  under  the 
policy.  This  means  that  the  action  on  the  policy  is  to 
be  brought  against  the  manager  and  the  amount  of  the 
loss  fixed  and  pro  rated  among  the  underwi'iters.  The 
validity  of  these  stipulations  has  been  sustained  where 
the  manager  against  whom  the  action  is  to  be  brought 
is  also  one  of  the  underwriters  and  therefore  is  liable  in 
contract  to  the  plaintiff.^    When  judgment  has  been 

imposed  on  citizens  of  Florida  was  held  unconstitutional.  State  ex  rel. 
Hoadley  v.  Board  of  Ins.  Commissioners,  37  Fla.  564,  574,  29  So. 
772. 

A  majority  of  the  court  held  constitutional  the  statute  of  Pennsylva- 
nia forbidding  the  issue  of  poUcies  of  insm-ance  by  individuals,  partner- 
ships or  associations.  It  did  not  discriminate  against  citizens  of  other 
States.    Comm.  v.  Yrooman,  164  Pa.  St.  306,  20  Atl.  217. 

The  statute  of  Pennsylvania  making  it  unlawful  for  any  person,  part- 
nership or  association  to  execute  poUcies  of  fire  insurance  in  the  State 
makes  it  improper  to  hcense  the  agent  of  a  New  York  Lloyds  Associa- 
tion. Opinion  of  Attorney  General,  re  License  in  Pennsylvania,  3  Pa. 
Dist.  Rep.  822. 

^  Where  the  attorneys  are  also  underwriters  action  is  properly 
brought  against  them,  the  amount  of  the  loss  and  the  liabihty  of  each 
underwriter  determined.  It  will  be  binding  upon  the  underwriters  hke 
any  agreement  to  be  bound  by  a  judgment  against  another.  Leiter  v. 
Beecher,  37  N.  Y.  S.  1114,  2  App.  Div.  577.    Ace.  Lawrence  v.  Schaefer, 

177 


§  49]  UNASSOCIATED   GROUPS  [Chap.  IV 

obtained  against  the  attorney  in  accordance  with  the 
terms  of  the  pohcy  an  action  may  be  brought  against 
the  individual  underwriter  on  his  agreement  to  abide  by 
that  judgment.  He  is  bound  by  that  judgment  because 
he  agreed  to  be  and  can  raise  no  question  as  to  the  vahd- 
ity  of  the  pohcy.  ^    Where  the  attorney  was  not  also  an 

42  N.  Y.  S.  992,  19  Misc.  239,  aff'd  46  N.  Y.  S.  719,  20  App.  Div.  80; 
Stieglitz  V.  Belding,  45  N.  Y.  S.  670,  20  Misc.  297. 

An  additional  clause,  however,  requiring  the  action  to  be  brought 
only  in  a  specified  court  of  New  York,  was  void.  McLean  v.  Tobin,  109 
N.  Y.  S.  926,  58  Misc.  528. 

"There  is  a  wide  difference  in  principle  between  restricting  the  power 
of  the  courts  to  adjudicate  on  the  rights  of  htigants  arising  under  con- 
tracts and  the  provision  that  a  fund  owned  by  the  persons  liable  in  dam- 
ages may  be  reached  in  an  action  against  the  custodians  of  that  fund 
and  the  individual  liabihty  of  the  owners  of  the  fund  shall  be  fixed  by 
the  judgment  in  such  actions  and  enforced  against  them  after  the  fund 
is  exliausted."  Action  was  properly  brought  against  the  attorneys. 
Compton  V.  Beecher,  44  N.  Y.  S.  887,  890,  17  App.  Div.  38. 

Judgment  against  the  attorney  is  a  condition  precedent  to  action 
against  the  individual  underwriter  on  a  Lloyds  pohcy  and  must  be 
pleaded  and  proved  by  the  plaintiff.  Ketchum  v.  Belding,  68  N.  Y.  S. 
1099,  58  App.  Div.  295. 

A  stipulation  in  a  pohcy  that  no  action  shall  be  brought  upon  it 
against  more  than  one  underwriter  at  a  time  and  that  the  others  agree  to 
abide  by  it  is  vahd  and  is  a  sufficient  answer  to  an  action  against  all  the 
underwriters.  The  action  should  be  dismissed  as  against  all  but  one. 
New  Jersey,  etc.  Works  v.  Ackerman,  39  N.  Y.  S.  585,  6  App.  Div.  540. 

After  the  insured  recovered  judgment  by  default  against  the  attor- 
ney, he  brought  an  action  against  the  underwriter.  Later  the  attorney 
had  the  judgment  vacated  and  a  trial  in  which  plaintiff  again  got  judg- 
ment. This  he  now  seeks  to  set  up  by  supplemental  complaint.  Held: 
By  the  terms  of  the  policy  that  "no  action  shall  be  brought  against 
more  than  one  underwriter  at  any  time"  is  meant  "at  any  one  time" 
and  this  was  not  violated  here.  There  is  no  provision  in  this  pohcy 
requiring  judgment  against  the  attorney  as  a  condition  precedent. 
Peabody  v.  Germain,  57  N.  Y.  S.  860,  40  App.  Div.  146. 

*  Hence  the  fact  that  the  Lloyds  had  not  complied  with  the  statute 
requiring  all  persons,  partnerships  or  associations  to  make  the  same 
deposits  with  the  insurance  commissioner  as  a  coiiioration  was  immate- 
rial.   Conant  v.  Jones,  64  N.  Y.  S.  189,  50  App.  Div.  33t). 

An  action  was  broiiglit  in  New  Jersey  on  a  IJoyds  policj^  against  an 
und(!r\\Tit(!r  after  judgment  against  tlie  attorney  in  New  York.  The 
action  was  on  tli('  jjolicy,  not  on  tlie  judgment.  Hckl:  Tlie  obtaining 
of  the  judgnierit  is  iiuinsly  a  condition  precedent  to  action  on  the  pohcy 
ugaiiisl  t  lie  iirid(Twrit(;rH.  It  could  not  merge  the  cause  of  act  ion  against 
th(!  un(lcrwrit(;rH  bticause  they  are  not  named  as  ])arties.  The  amount 
it  fixes  is  at  least  pritna  facie  evi(lciic(!  as  against  this  defendant  (will 

178 


Chap.  IV]  LLOYD'S  INSURANCE  [§  49 

underwriter  action  has  been  allowed  directly  against 
the  underwriters  on  the  ground  that  the  stipulation 
that  action  must  first  be  brought  against  the  attorney  is 
incapable  of  performance  and  so  not  a  condition  pre- 
cedent to  an  action  directly  against  the  underwriters. 
The  attorneys  could  not  be  sued  because,  not  being 
underwriters,  they  were  not  parties  to  the  contract  of 
insurance  and  because  they  acted  for  known  principals 
they  could  not  be  sued  as  agents.^    When  at  the  time 

not  decidie  if  conclusive).  When  the  attorney  is  also  an  underwriter  it 
is  a  valid  condition.  Such  poUcies  are  valid  in  the  absence  of  statutes 
forbidding  them  and  the  underwriters  may  do  business  in  other  States. 
Enterprise  Co.  v.  Mundy,  62  N.  J.  L.  16,  42  Atl.  1063,  1065. 

An  action  was  brought  against  the  attorney.  The  policy  provided 
for  apportionment  of  the  funds  in  the  hands  of  the  attorney  among  all 
claims  pro  rata.  It  was  alleged  that  there  were  losses  requiring  such  ap- 
portionment. Held :  The  pohcy  does  not  contemplate  an  equitable  pro- 
ceeding for  accounting  and  apportionment  as  a  condition  precedent  to 
action  against  the  individual  underwriters,  but  an  action  at  law  with 
execution  on  the  judgment.  Hence  it  is  to  be  satisfied  out  of  the  trust 
fund  in  the  hands  of  the  attorney,  if  any,  for  its  full  amount.  Hence 
evidence  of  the  existence  of  other  claims  was  properly  excluded.  Other 
persons  not  parties  of  record  cannot  be  bound  by  such  a  judgment.  The 
underwriter  cannot  be  bound  individually  by  this  judgment  because  not 
a  party.  The  attorney  is  not  trustee  of  the  underwriters  for  that  pur- 
pose.   Gough  V.  Satterlee,  52  N.  Y.  S.  492,  32  App.  Div.  33. 

9  Knorr  v.  Bates,  35  N.  Y.  S.  1060,  14  Misc.  501;  Biggert  v.  Hicks, 
42  N.  Y.  S.  236,  18  Misc.  593;  Railh  v.  White,  46  N.  Y.  S.  376,  20  Misc. 
635. 

Where  the  attorney  is  not  himself  an  underwriter  and  never  in  any 
way  became  liable  thereon,  the  condition  precedent  that  action  shall  first 
be  brought  against  the  attorneys  is  against  pubUc  policy  and  void.  Far- 
jeon  V.  Fogg,  37  N.  Y.  S.  980,  16  Misc.  219. 

When  the  attorney  is  not  an  underwriter  he  cannot  be  sued  in  spite 
of  the  provision  in  the  pohcy.  Under  the  New  Jersey  statutes  an 
association  may  be  sued  in  its  association  name  on  any  action  affecting 
the  common  property.  There  was  an  association  and  so  action  properly 
brought.  Bank  of  Toronto  v.  Manf .  &  Merch.  Fire  Ass'n,  63  N.  J.  L. 
5,  13,  42  Atl.  761. 

A  Lloyds  pohcy  contained  a  clause  not  expressly  authorizing  an  ac- 
tion against  the  attorney  but  forbidding  an  action  against  more  than 
one  underwriter  and  binding  the  others  by  the  judgment  therein. 
Held :  This  clause  was  not  binding  since  not  specifically  mentioned  in 
the  power  of  attorney  under  which  the  pohcy,  was  issued.  Hence  suit 
could  be  brought  against  several  underwriters  simultaneously.  A 
clause  requiring  suit  in  the  highest  court  of  the  State  was  void  as  against 

179 


§  49]  UNASSOCIATED   GROUPS  [Chap.  IV 

action  is  brought  the  plaintiff  could  not  perform  the 
condition  precedent,  action  has  been  allowed  directly 
against  the  underwriters,  as  in  a  case  where  the  attorneys 
have  tried  to  resign  and  substitute  others  and  the  plaintiff 
would  have  to  decide  at  his  peril  which  was  the  proper 
one  to  sue,^°  or  where  there  were  no  attorneys  and  no 
fund  except  the  individual  liability.  ^^  The  condition 
is  performed  by  service  on  him  who  is  in  fact  manager 
at  the  time.^^  The  attorney  under  the  power  to  contest 
claims  has  power  to  appeal. ^-^  Proceedings  supplemen- 
tary to  execution  may  not  be  maintained  upon  a  judg- 
ment against  the  attorney  in  his  representative  capac- 
ity.    The  plaintiff  should  sue  the  underwriters.^^    In 

public  policy.  Blair  v.  National  Shirt  &  Overalls  Co.,  137  111.  App.  413, 
416. 

1"  American  Lucol  Co.  v.  Blanchard,  57  N.  Y.  S.  14,  26  Misc. 
315. 

11  American  Lucol  Co.  v.  Lowe,  58  N.  Y.  S.  687,  690,  41  App.  Div. 
500;  Gilchrist  v.  Transp.  Co.,  21  Ohio  Cir.  Ct.  Rep.  19;  Transp.  Co.  v. 
Gilchrist,  24  Ohio  Cu-.  Ct.  Rep.  165,  167. 

1-  The  pohcy  required  notice  to  the  attorney  and  named  him.  Before 
the  loss  the  attorney  had  resigned,  a  new  one  had  succeeded  him  and 
defendant  underwriter  had  withdrawTi  from  the  Lloyds.  Held: 
Notice  to  the  attorney  who  succeeded  is  sufficient.  Defendant's  re- 
tirement did  not  affect  his  liabiUty  on  the  pohcy.  Walker  v.  Beecher, 
36  N.  Y.  S.  470,  15  Misc.  149. 

Notice  of  loss  to  those  actually  attorneys  at  the  time  though  not  the 
ones  named  in  the  policy  cannot  be  complained  of  by  the  underwriters. 
Railli  V.  White,  46  N.  Y.  S.  376,  20  Misc.  635. 

Action  was  properly  brought  against  one  who  in  fact  was  the  attor- 
ney at  the  time  the  policy  was  issued,  though  an  old  blank  was  used 
giving  the  name  of  a  foiTner  attorney.  Wheelock  v.  Chapman,  54  N.  Y. 
S.  327,  34  App.  Div.  464. 

.Judgment  was  recovered  against  the  attorneys  in  fact  on  a  Lloyds 
policy  and  the  insured  sought  to  collect  from  the  individual  under- 
writers. Defense  that  the  power  of  attorney  conferred  a  joint  power 
on  the  three  members  of  the  firm  and  these  policies  were  executed  by 
only  two  members  of  the  firm.  Held:  The  true  construction  of  the 
power  gave  u  joint  and  several  power  to  the  attorneys.  Hence  the 
pohc-icH  W(!r(!  wc^ll  executed.  Unterberg  v.  Elder,  134  N.  Y.  S.  242,  149 
Aj)p.  Div.  647. 

"  I><)wr(!y  V.  Bat  OH,  .^)6  N.  Y.  S.  197,  26  Misc.  407. 

'*  Kriegiuan  v.  Dunphy,  122  N.  Y.  S.  111(5,  66  Misc.  221. 

Under  the  code  one  action  may  bt;  Ijrought  against  all  defendants 

180 


Chap.  IV]  LLOYD'S  INSURANCE  [§  49 

subsequent  proceedings  against  the  underwriters  the 
plaintiff  must  show  that  execution  issued  on  the  judg- 
ment against  the  attorney  and  that  no  unexpended 
premiums  or  deposits  were  found. ^^  Satisfaction  of  the 
judgment  against  the  attorney  is  a  bar  to  an  action 
against  the  underwriters  even  when  by  mistake  the 
plaintiff  has  taken  judgment  against  the  attorney  for 
only  his  share  of  the  loss.^^  In  case  of  partial  loss,  each 
underwriter  is  liable  for  the  face  value  of  his  share  of  the 
loss  until  it  is  satisfied  and  must  protect  himself  by 
proceeding  against  the  other  underwriters  for  contribu- 
tion.^^ A  clause  in  the  policy  commonly  limits  the  ag- 
gregate liability  of  each  underwriter  on  all  policies.^* 

severally  liable.  Isear  v.  Daynes,  37  N.  Y.  S.  474;  Isear  v.  McMahon,  37 
N.  Y.  S.  1101,  16  Misc.  95. 

Where  the  Uabihty  of  each  underwriter  is  expressly  hmited  to  a 
fraction  of  the  whole  amount  and  is  several  and  not  joint,  an  action 
cannot  be  brought  against  all  the  underwriters  but  should  be  brought 
against  each  separately.  Strauss  v.  Hoadley,  48  N.  Y.  S.  239,  23  App. 
Div.  360. 

15  Lowrey  v.  Bates,  56  N.  Y.  S.  197,  26  Misc.  407. 

i«  M'Credy  v.  Thrush,  56  N.  Y.  S.  68,  72,  37  App.  Div.  465. 

1^  McAllister  v.  Hoadley,  76  Fed.  1000  (D.  C.  —  N.  Y.);  Sumner 
V.  Piza,  91  Fed.  677  (D.  C  —  N.  Y.). 

In  the  action  against  the  individual  underwriter,  he  is  entitled  to 
credit  for  his  proportional  share  of  any  sum  paid  on  account  of  the  judg- 
ment against  the  attorney.    Cuff  v.  Heine,  56  N.  Y.  S.  393,  26  Misc.  859. 

1*  A  clause  in  a  Lloyds  policy  limited  the  liability  of  individual  un- 
derwriters "on  all  policies  now  or  hereafter  in  force"  after  exhaustion 
of  the  premiums  and  deposits  to  twenty-five  hundred  dollars.  In  an 
action  against  an  underwriter  after  judgment  against  the  attorney,  the 
defense  was  that  he  had  paid  out  his  $2500  ah'eady.  Held :  Sufficient 
defense.  The  plaintiff  is  bound  by  his  contract.  "There  is  nothing 
more  unreasonable  in  such  a  limitation  than  there  is  in  any  limitation 
an  obhgor  may  see  fit  to  place  upon  any  contract  he  may  see  fit  to  enter 
upon.  There  is  certainly  nothing  more  unreasonable  in  the  limitation 
than  there  is  in  the  hmitation  placed  by  law  upon  the  individual  lia- 
bility of  stockholders  in  ordinary  fu-e  insurance  companies."  Burke  v. 
Rhoads,  79  N.  Y.  S.  407,  409,  39  Misc.  208. 

The  clause  limiting  the  liability  of  each  to  an  aggregate  amount  on 
all  policies  is  a  condition  subsequent  and  the  plaintiff  need  not  aver 
that  the  amount  has  not  yet  been  exhausted.  Entei-prise  Co.  v.  Mundy, 
62  N.  J.  Law  16,  42  Atl.  1063. 

181 


§  50]  UNASSOCIATED   GROUPS  [Chap.  IV 

In  Illinois  it  was  held  that  the  liabilities  under  one  of 
these  policies  may  be  enforced  by  a  bill  in  equity.^^ 
There  will  probably  be  fewer  of  these  cases  in  future 
because  the  statutes  of  New  York,  whence  most  of 
these  policies  came,  now  make  this  form  of  insurance 
impracticable.-'' 

§  50.  Underwriters  of  Securities 

-  SjTidicates  under^Titing  securities  almost  always  re- 
cite in  their  agreement  that  nothing  therein  contained 
shall  be  construed  as  creating  a  partnership  between 
them.  The  courts,  however,  have  sometimes  held  such 
syndicates  to  be  partnerships.^    More  often,  however, 

^'  Equity  has  jurisdiction  of  a  suit  against  the  manager  of  a  Lloyds 
association  to  enforce  a  policy  because  the  remedy  of  equity  is  more 
flexible  and  it  may  become  necessary  to  compel  the  manager  to  collect 
the  fund  from  the  underwriters  out  of  which  this  policy  is  to  be  paid. 
The  jurisdiction  is  concurrent,  however,  for  the  plaintiff  might  have 
brought  an  action  at  law  under  the  terms  of  the  agreement  of  asso- 
ciation against  the  manager.  The  agreement  is  set  forth  at  length  on 
pages  4S9  et  seq.  It  provides  that  the  manager  shall  "appear  for  the 
subscribers  in  case  of  any  proceedings  at  law  being  taken  against  them 
in  connection  with  any  pohcy  and  in  their  name  defend,  compromise  or 
settle  the  same."  If  this  clause  did  not  appear  plaintiff  could  proceed 
in  equity  joining  a  few  to  represent  all.  There  was  no  provision  for 
meetings  but  the  subscribers  voted  by  mail  for  an  advisor\'  committee  of 
subscribers  to  supervise  the  conduct  of  the  business  by  the  manager 
who  was  appointed  by  separate  powers  of  attorney.  The  court  refers 
to  it  several  times  as  an  association.  Notice  by  a  subscriber  of  inten- 
tion to  withdraw  would  not  terminate  unexpired  policies.  Warfield- 
Howell  Co.  V.  Wilhamson,  233  111.  487,  49.5,  84  X.  E.  706. 

-"  By  §  54  of  the  Insurance  Law  of  New  York  associations  are  for- 
bidden to  do  business  under  any  name  except  the  true  name  of  the  per- 
sons comprising  the  a.s.sociation.  They  must  also  have  capital  and  make 
deposits  with  the  State  officials  hke  coiporations.  By  Chap.  684  of 
Laws  of  1894  this  was  made  inappUcable  to  Lloyds  doing  business  1  Opt. 
1892. 

Defendants  in  a  proceeding  to  prevent  transaction  of  business  by  the 
"Peopi(;'s  Lloyds"  claimed  to  be  assignees  of  members  of  such  an  ixsso- 
ciation  in  existence  1  Oct.  1892  and  therefore  not  prohibited.  Held: 
That  original  organization  was  for  the  i)ur])Ose  of  sale  and  was  not  en- 
gaged in  business  in  fact  at  the  time  alleged.  People  v.  Loew,  52  N.  Y.  S. 
799,  23  Misc.  574. 

•  Sec  §  8. 

182 


Chap.  IV]       UNDERWRITERS  OF  SECURITIES  [§  50 

they  have  not  had  to  pass  upon  the  question  but  have 
been  able  to  decide  the  issue  between  them  by  applying 
the  rules  of  agency,^  for  most  of  the  litigation  appears 

2  A  syndicate  promoting  a  real  estate  speculation  with  a  view  to  in- 
corporation. The  holder  of  the  option  made  a  secret  profit  for  which 
the  rest  sue.  Held:  "We  think  it  is  recognized  by  the  decisions  in  Illi- 
nois as  elsewhere  that  syndicate  or  association  subscriptions  to  purchase 
land  or  interests  in  land  or  perhaps  any  other  purchasable  commodity 
establish  if  not  a  partnership  at  least  such  fiduciary  relations  between 
the  associates  as  impose  a  trust  character  on  funds  confided  by  the  others 
to  the  purchasing  agent  and  entitle  them  to  ask  in  equity  an  account- 
ing and  the  restoration  of  money  improperly  diverted  from  its  intended 
purpose."    Maxwell  v.  McWilliams,  145  111.  App.  155,  176. 

X  got  up  a  syndicate  of  ten  to  buy  some  land  on  mortgage.  In  fact 
X  was  agent  of  vendor  and  was  making  a  secret  profit.  Also  at  last  mo- 
ment one  of  the  original  syndicate  refused  to  sign  the  contract  of  pur- 
chase and  X substituted  another  unknown  to  the  other  eight.  Held: 
Vendor  cannot  enforce  the  contract  against  other  members  of  s3Tidicate. 
"These  parties  not  only  contracted  with  the  plaintiff  but,  by  implica- 
tion of  law,  contracted  with  one  another.  They  had  chosen  their  asso- 
ciates with  whom  they  agreed  to  contract.  No  authority  is  recognized 
by  the  law  under  which  the  parties  may  be  changed  without  the  assent 
of  the  associates."  "The  contract  as  it  appears  with  the  substituted 
associate  is  not  the  contract  in  which  the  minds  of  the  other  associates 
met.  It  is  void  and  cannot  be  enforced  "  (p.  223).  Also  because  of  the 
secret  profit  of  plaintiff's  agent  (p.  224).  Crittenden  v.  Armour,  80  la. 
221,  45  N.  W.  888. 

A  syndicate  was  formed  to  acquire  securities  of  certain  corporations. 
A  treasurer  was  appointed  to  negotiate  notes  of  the  syndicate  and  handle 
its  funds.  He  made  a  construction  contract  on  behalf  of  the  S5mdicate 
that  involved  liabiUties  far  in  excess  of  those  contemplated  by  the  origi- 
nal agreement.  A  member  protested  and  withdrew  and  the  deal  went 
through  without  him,  without  formal  reorganization,  and  made  large 
profits.  He  now  claims  his  share.  Held:  The  construction  contract 
was  rightly  excluded.  "As  before  shown,  there  was  no  evidence  that 
I.  C.  Libby  was  ever  expressly  authorized  to  execute  the  constuction 
contract  on  behalf  of  the  syndicate  and  he  obviously  had  no  greater 
power  than  that  possessed  by  every  other  member  of  the  syndicate. 
If  the  syndicate  is  to  be  termed  a  co-partnership,  it  must  be  considered 
that  it  was  only  a  special  partnership  with  its  scope  and  purpose  ex- 
pHcitly  defined  and  Hmited."  Hence  he  had  no  impUed  authority. 
Merrill  v.  Milliken,  101  Me.  50,  56,  63  Atl.  299. 

Plaintiff  brought  an  action  at  law  on  a  contract  under  which  plaintiff 
acquired  certain  property  for  the  Little  Kanawha  Syndicate.  The  de- 
fendants were  the  syndicate  managers.  The  court  below  held  the  de- 
fendants were  not  liable  because  they  acted  as  agents  for  a  known  prin- 
cipal. The  court  above  Held:  The  complaint  alleged  a  contract  in 
which  the  agents  expressly  bound  themselves  personally,  and  so  would  be 
liable.    Even  if  the  complaint  is  not  to  be  so  construed,  the  agents  would 

183 


§  50]  rXASSOCIATED   GROUPS  [Chap.  IV 

to  have  arisen  between  the  sjTidicate  managers  or  agents 
and  its  members.    In  an  important  recent  case  where  a 

be  liable  on  the  theorj^  that  they  exceeded  their  authority,  for  the  s>ti- 
dicate  agreement  stipulates  that  each  subscriber  shall  be  liable  only  to 
the  sjTidicate  managers  and  then  only  to  the  amount  of  his  subscription. 
If  the  members  of  the  sj-ndicate  are  Uable  as  partners,  then  the  defend- 
ants as  members  are  also  hable,  and  not  ha^ong  pleaded  in  abatement  the 
non-joinder  of  the  other  partners  cannot  raise  that  defense  now.  Jones 
V.  Gould,  200  X.  y.  18,  20,  72  X.  E.  1071.  See  Jones  v.  Gould,  209  X.  Y. 
419,  103  X.  E.  720. 

A  sjTidicate  was  formed  to  float  an  independent  telephone  franchise 
in  Xew  York  Citj'  rnvohnng  the  securities  of  several  corporations. 
Finallj'  a  voting  trust  and  later  a  holding  company  was  formed  to 
carrj'  some  of  these  securities.  In  the  prospectus  of  the  holding  com- 
panj'  were  false  representations  for  which  action  was  brought.  The 
issue  was  whether  the  holding  company  or  the  sjTidicate  were  hable. 
Held:  "Those  members  of  the  sj-ndicate  who  authorized  the  appoint- 
ment of  the  managers  who  issued  the  prospectus  and  those  members  of 
the  sjTidicate  who,  coming  into  the  s^Tidicate  after  the  managers  were 
appointed,  approved  of  theaction  which  had  already  been  taken  concern- 
ing such  appointment  are  Hable  for  any  fraud  committed  by  those  man- 
agers in  thus  offering  the  property  of  the  sj-ndicate  for  sale."  "The 
burden  of  pro%'ing  agency  rested  upon  the  plaintiff  in  the  first  instance; 
but  when  the  plaintiff  proved  that  the  managers  had  been  appointed 
and  acted  as  such  throughout  the  entire  life  of  the  sj-ndicate,  the  infer- 
ence would  seem  to  be  a  fair  one  that  those  joining  the  sjTidicate  subse- 
quent to  the  appointment  knew  who  the  managers  were  unless  the  con- 
trary was  shown."  Lane  v.  Fenn,  120  X.  Y.  S.  237,  255,  256,  65  Misc. 
336.  See  Homblower  v.  Crandall,  7  Mo.  App.  220,  aff'd  78  Mo. 
581. 

A  syndicate  agreement  to  imderwrite  stock  pro\aded  that  the  man- 
ager should  borrow  on  the  security  of  the  stock  "in  behalf  of  the  sub- 
scribers severally  in  proportion  to  their  subscriptions  and  by  delivery 
of  the  agreement  as  evidencing  the  subscribers'  several  guarantees  of 
repajTnent  of  the  loan."  Also  provided  that  only  the  manager  could  sue 
on  the  agreement.  He  borrowed  of  plaintiff  who  now  sues  an  under- 
wTiter  for  the  balance  of  his  subscription  to  apply  on  the  unpaid  bal- 
ance of  the  loan.  Held:  Action  maintainable  on  several  grounds. 
(1)  Reading  the  two  contracts  as  one,  there  was  a  guaranty  of  pay- 
ment that  ran  to  plaintiff.  (2)  Manager  had  authority  to  bind  defend- 
ant by  liis  agreement.  (3)  Though  the  agreement  sa3's  the  right  of 
action  is  vested  solely  in  the  manager,  he  could  assign  it  to  plaintiff. 
Union  Trust  Co.  v.  Van  Schaick,  141  X.  Y.  S.  955,  156  App.  Div. 
769. 

An  underwriting  agreement  authorized  the  manager  of  the  syndicate 
to  ple<lgo  the  underwriting  agreement  and  execute  a  guaranty.  Held: 
Thi.s  could  be  done  only  by  all  the  managers  as  individuals  and  not  in 
finn  name  (managers  were  partners).  Union  Land  Co.  v.  Gwynn, 
144  X.  Y.  S.  110,  121,  158  App.  Div.  829. 

A  subscriber  to  a  syndicate  for  the  reorganization  of  a  corporation 

184 


Chap.  IV]        UNDERWRITERS   OF   SECURITIES  [§  50 

creditor  sought  to  hold  as  a  partner  one  of  the  mana- 
gers of  a  syndicate  on  a  contract  by  another,  the  court 
discussed  the  relations  of  managers  and  subscribers. 
The  defendants  were  managers  of  a  syndicate  formed 
to  buy  one  railroad,  build  another  and  buy  lands  along- 
side. By  the  agreement  the  managers  were  to  do  all 
acts  necessary  for  that  purpose  and  'Ho  absolutely  con- 
trol the  property  so  to  be  constructed  or  purchased  as 
fully  in  all  respects  as  if  they  were  the  absolute  owners 
thereof."  On  sale  of  the  properties  the  managers  were 
to  divide  the  cash  or  securities  pro  rata  among  the  sub- 
scribers ''from  time  to  time  in  their  discretion."  Noth- 
ing therein  was  "to  constitute  the  syndicate  subscrib- 
ers partners  with  the  syndicate  managers  or  as  to  each 
other."  In  an  action  against  the  managers  on  a  con- 
tract made  by  one  of  them  it  was  held  that  the  relation 
between  the  managers  and  subscribers  (though  fidu- 
ciary) was  not  that  of  principal  and  agent.  The  man- 
agers themselves  were  principals  in  any  contract  they 
might  make.  The  managers  and  subscribers  were  not 
partners,  for  the  subscribers  had  no  right  in  the  prop- 
erties acquired  except  to  a  share  on  winding  up.  Hence 
the  defendants  could  not  set  up  that  they  were  partners. 

brought  a  bill  against  the  sjmdicate  managers  for  rescission  after  the 
reorganization  was  completed  and  tendered  back  his  shares  in  the  new 
corporation  on  the  ground  that  the  managers  failed  to  disclose  their 
interest  in  the  transaction  as  owners  of  some  of  the  stock  of  the  original 
company.  Held:  The  bill  stated  a  cause  of  action.  Heckscher  y.  Eden- 
bom,  203  N.  Y.  210,  96  N.  E.  441.  In  another  case  arising  out  of  the 
same  transaction  the  Federal  Coiu"t  held  that  the  remedy,  if  any,  was 
in  the  corporation.  The  plaintiff  cannot  restore  the  status  quo.  Eden- 
bom  V.  Sim,  206  Fed.  275  (C.  C.  A.  —  N.  Y.). 

A  trust  company  that  held  the  secm-ities  for  the  managers  was  not 
trustee  for  the  subscribers  to  the  syndicate  agreement  but  a  mere  de- 
positor or  agent  for  the  managers.  Agreement  construed  to  authorize 
managers  to  extend  the  time  within  which  it  was  to  be  carried  out  and 
that  obtaining  consent  of  subscribers  was  a  precautionary  measure  only. 
Kelly  V.  lUinois  State  Trust  Co.,  215  Fed.  567,  572  (C.  C  A.  —  lU.). 

185 


§  50]  UNASSOCIATED  GROUPS  [Chap.  IV 

''The  work  which  the  defendants  undertook  to  carry 
out  was  not  the  prosecution  of  any  general  business  but 
was  Umited  to  a  single  enterprise.  ,  .  .  This  was  not 
strictly  a  partnership  though  it  had  many  of  the  fea- 
tures of  such  a  relation.  It  was  what  is  now  generally 
known  as  a  joint  venture  rather  than  a  commercial 
partnership.  The  authorities  in  some  of  the  States 
hold  that  in  the  prosecution  of  the  venture  each  party 
has  the  same  full  power  to  bind  his  associates  in  any 
contract  in  regard  to  the  ventiire  that  an  ordinary 
commercial  partner  would  have.  We  are  not  now  in- 
clined to  hold  that  doctrine  in  its  full  integrity,  but  such 
ruling  is  not  necessary  to  the  case."  There  was  express 
authority  from  the  other  defendants  to  the  one  making 
the  contract.^ 

The  conclusion  of  the  court  that  they  were  not  part- 
ners, it  is  submitted  was  correct.  The  endorsement 
given  to  the  use  of  the  term  joint  venture  or  joint  ad- 
venture as  describing  a  relation  distinct  from  partner- 
ship existing  for  the  purpose  of  a  single  enterprise  has, 
however,  little  to  commend  it.''  If  the  term  is  meant 
to  describe  the  relation  of  groups  of  independent  con- 
tractors caUed  herein  ''unassociated  groups,"  it  may,  if 
confined  in  future  to  cases  of  that  class,  prove  more  ac- 
ceptable than  the  title  here  suggested,  though  the  latter 
seems  more  characteristic.  It  is  possible,  however,  that 
the  relation  which  the  court  had  in  mind  was  really  that 
of  trust.  The  statement  that ' '  the  managers  themselves 
were  principals  in  any  contract  which  they  might  make" 
suggests  it.  Indeed,  in  carefully  drawn  underwriting 
agreements  the  managers,  though  not  so  described,  are 

»  Jonofl  V.  Gould,  209  N.  Y.  419,  424,  42G,  103  N.  E.  720.  See  also 
Jonc8  V.  Gould,  200  N.  Y.  18,  92  N.  E.  1071. 

*  Sec  § ;{. 

180 


Chap.  IV]        UNDERWRITERS   OF   SECURITIES  [§  50 

really  trustees  for  the  subscribers.  It  seems  likely  that 
as  these  organizations  come  more  frequently  before  the 
courts,  the  problems  they  give  rise  to  will  be  easily 
solved  by  the  principles  of  the  law  of  trusts  and  that 
they  will  be  classified  with  the  cases  included  in  chap- 
ter III. 

Analogous  to  these  formal  syndicates  are  occasional 
cases  relating  to  those  extreme  productions  of  the 
speculative  mania  popularly  called  ''pools"  or  ''blind 
pools."  These  are  usually  most  informal  arrangements 
whereby  a  group  of  individuals  entrust  their  money 
to  some  person  to  be  used  for  some  highly  speculative 
enterprise.  In  one  of  these  cases  the  court  described 
the  relation  as  a  quasi  partnership. 

A  promoter  interested  B  in  some  copper  mines.  B 
neglected  to  investigate  carefully  but  decided  to  buy 
the  property  and  incorporate  the  enterprise.  He  al- 
lowed some  of  his  friends  to  come  into  the  enterprise 
and  they  subscribed  $250,000  without  knowing  any- 
thing about  the  details  of  the  proposition.  B  gave  re- 
ceipts as  follows:  "Subscription  of  $ —  to  an  under- 
writing syndicate  for  the  flotation  of  certain  copper 
properties  in  Ai'izona  and  New  Mexico."  The  money 
was  used  by  B  to  buy  the  property,  which  he  conveyed 
to  certain  corporations  the  stock  of  which  was  owned 
by  a  holding  company.  The  stock  was  so  watered  that 
it  could  not  be  sold  on  the  market  and  B  distributed  it 
to  the  subscribers.  A  bill  in  equity  by  a  subscriber 
against  B  for  rescission  of  the  contract  and  an  account- 
ing was  dismissed  because  no  fraud,  only  negligence 
was  shown. 

In  the  opinion  the  court  said:  "In  the  general  man- 
agement of  the  business,  until  the  time  came  for  deter- 

187 


§  50]  UNASSOCIATED  GROUPS  [Chap.  IV 

mining  how  many  shares  of  the  stock  and  what  part  of 
the  property  the  subscribers  were  entitled  to  receive, 
Burrage  was  not  acting  in  matters  in  which  he  had  a 
personal  interest  adverse  to  the  subscribers,  in  such  a 
way  as  to  subject  him  to  the  strict  rule  which  ap- 
plies to  those  acting  for  themselves  in  the  business 
of  others  to  whom  they  stand  in  a  fiduciary  relation. 
In  a  sense  he  was  acting  as  their  agent  and  trustee  in 
matters  in  which  he  and  they  had  a  common  interest. 
They  were  quasi  partners  with  him  in  the  enterprise, 
and  his  relation  to  them  was  analogous  to  that  of  a 
partner  to  his  co-partner.  It  is  not  suggested  that  his 
advances  to  the  Arimex  Company  by  way  of  loans 
were  not  made  in  good  faith,  with  a  view  to  the  best 
interests  of  the  corporation." 

It  is  not  to  be  believed,  however,  that  the  court  by 
the  words  quasi  partnership  intended  to  describe  a  new 
form  of  partnership,  but  rather  to  say  that  the  fiduciary 
obligation  existing  between  partners  also  exists  between 
the  men  who  manage  the  affairs  of  the  pool  and  the 
other  contributors.  This,  of  course,  is  nothing  more  than 
an  application  of  the  principles  of  agency.^  The  word 
"pool"  has  acquired  no  definite  meaning  except  so  far 
as  it  connotes  an  irresponsible  gambling  instinct.  In 
many  cases  it  will  be  found  that  the  arrangement  has 
all  the  elements  of  a  partnership  '^  or  of  a  trust.     In 

5  Runkle  v.  Burrage,  202  Mass.  89,  SS  N.  E.  573. 

*  Plaintiff  and  dofondant  formed  a  pool  to  speculate  in  stock  in  a  cor- 
poration. Plaintiff  was  to  have  the  profit  on  two  hundred  and  fifty 
sharcH  and  if  the  stock  sold  above  a  certain  pri(!e  was.  to  share  equally 
with  th(!  other  in  the  excess  profit  on  all  the  shares.  Later  the  scheme 
was  changed  and  the  j)laiii(ilT  was  induced  to  agn^;  to  a  new  l)onus  on 
whif'h  h(!  got  less.  Held:  lie  was  induced  to  assent  to  the  ratification 
hy  false  representations  of  fact.  Whether  the  relation  of  ])laint.iff  and 
*lcfcndants  was  a  t(rchnical  partnership  or  a  joint  adventure  is  immate- 
rial.   T]h-  legal  rules  that  ajjply  to  such  an  agreement  are  ])rccisely  the 

188 


Chap.  IV]       UNDERWRITERS   OF  SECURITIES  [§  50 

some  cases  it  appears  only  as  a  relation  of  debtor  and 
creditor  between  the  manager  of  the  pool  and  his 
victims. 

In  bankruptcy  proceedings  against  an  individual 
trading  under  the  name  of  Minnesota  Grain  and  In- 
demnity Company,  certain  creditors  showed  that  he 
had  issued  to  them  certificates  entitling  them  to  share 
in  a  pool  which  he  had  formed  for  speculation  in  wheat. 
The  court  did  not  have  to  decide  whether  the  contract 
was  illegal  as  a  gambling  contract  or  not.  As  to  the 
relations  of  the  certificate  holders,  the  court  said: 

''To  the  other  claimants  mentioned  in  said  order 
three  kinds  of  certificates  and  only  three  were  issued 
by  Norris.  In  the  great  majority  of  cases  the  certifi- 
cates stated  that  Norris  had  received  a  sum  of  money 
therein  mentioned  in  full  payment  for  a  number  of 
shares  therein  stated  in  the  pool  of  the  Minnesota  Grain 
and  Indemnity  Company,  in  which  name  Norris  was 
then  doing  business.  By  the  terms  of  that  certificate 
the  company  agreed  to  invest  this  money  according 
to  its  judgment  and  to  pay  the  certificate  holder  on  the 
first  of  any  month  his  pro  rata  share  of  the  profits  on 
hand  at  that  time.  The  holder  could  draw  the  whole 
or  any  part  of  his  money  on  the  first  of  any  month  by 
giving  ten  days'  notice  of  his  intention  so  to  do,  and  the 
company  could  cancel  the  certificate  on  the  first  day 
of  January,  1910,  or  on  the  first  day  of  any  January 
after,  by  giving  thirty  days'  notice. 

''By  the  second  form  of  contract  the  Indemnity  Co., 
that  is,  Norris,  agreed  to  pay  a  dividend  of  $2.50  a 
share  on  each  and  every  hundred  dollars  of  profit,  pay- 
same  as  those  that  apply  to  a  technical  partnership.  The  relation  is 
fiduciary  and  requires  the  utmost  good  faith.  Dissent  on  fact  of  false 
representation.    Spier  v.  Hyde,  87  N.  Y.  S.  285,  288,  92  App.  Div.  467. 

189 


§  50]  UNASSOCIATED   GROUPS  [Chap.  IV 

able  on  the  first  of  each  month.  This  also  provided  that 
an  investment  could  be  withdrawn  on  the  first  of  any 
month  by  giving  ten  days'  notice.  It  made  no  provi- 
sion for  repayment  by  the  company. 

''The  third  form  of  certificate  was  similar  to  the 
second  except  that  it  did  not  contain  the  word  'pool.' 

''The  relation  created  by  each  of  these  certificates  be- 
tween the  parties  was  that  of  lender  and  borrower. 
There  is  nothing  in  them  to  support  the  contention  that 
the  relation  was  that  of  partners.  The  word  '  pool '  is  en- 
tirely insufficient  for  that  purpose.  The  person  paying 
the  money  had  the  right  to  withdraw  it  at  any  time. 
Norris  had  the  right  to  return  it  at  stated  intervals.  The 
fact  that  di^ddends  were  paid  from  the  profits  indicated 
only  that  such  was  the  method  adopted  for  pajdng  inter- 
est on  the  money  loaned."  ^  In  most  instances,  how- 
ever, the  "pool"  will  probably  be  found  to  be  a  collec- 
tion of  independent  contracts  with  a  conamon  agent. ^ 

^  In  re  Norris,  190  Fed.  101,  102  (D.  C.  —  Minn.). 

'  Action  by  managers  of  a  pool  to  buy  and  sell  stock  in  a  mining 
company  against  a  member  of  the  pool  for  the  price  of  his  share  of  the 
stock  left  in  the  pool.  The  ^Titten  agi'eement  provided  that  if  any  mem- 
ber failed  to  take  up  his  share  of  the  stock  at  the  request  of  the  mana- 
gers, they  could  sell  it  for  his  account  and  that  the  pool  should  con- 
tinue for  three  months.  The  last  purchase  was  in  1903,  and  this  action 
was  brought  in  1908.  Held:  The  action  is  upon  a  written  instrument 
and  the  six-year  statute  of  limitations  applies.  The  action  was  brought 
in  time.  The  stipulation  about  sale  of  shares  on  default  was  inserted 
for  the  benefit  of  the  managers.  They  were  under  no  dutj'  to  sell  if  the 
defendant  did  not  instruct  Ihem  to.  They  could  continue  the  defend- 
ant as  a  member  of  the  pool  and  still  hold  him  for  the  price  of  the  stock. 
McMillan  v.  Whitley,  38  Utah  452,  113  Pac.  1026,  1028.  See  Hoare  v. 
Dawes,  1  Douglass  371,  and  see  §  53. 

An  example  of  informal  "pool  certificates,"  so  called,  appears  in 
Smith  V.  Kinney,  143  Pac.  901,  1126  (Ore.). 

An  underwriting  agreement  to  bu}'  bonds  if  the  manager  to  whom  the 
covenants  ran  did  not  sell  them.  It  is  no  defense  that  they  turned  out 
If)  he.  worthless.  The  contract  was  assignable.  The  contract  was  not 
an  agreement  to  loan  money  to  the  coiporat ion  but  to  insure  the  sale  of 
tli(!  bonds.  Busch  v.  Strora'berg  Co.,  217  Fed.  328,  331,  333  (C  C.  A.— 
Mo.). 

190 


Chap.  IV]       UNSUCCESSFUL   INCORPORATORS  [§51 

§  51.  Unsuccessful  Incorporators 

In  some  States  those  who  attempt  to  form  a  corpora- 
tion and  who  so  far  fail  that  they  do  not  effect  even  a 
de  facto  corporation  are  held  not  to  be  partners.^  Since 
they  have  organized  for  the  pm-pose  of  doing  business 
for  profit,  however,  and  since  they  are  clearly  associ- 
ated in  precisely  the  same  manner  in  which  they  would 
have  been  associated  if  they  had  been  a  corporation, 
it  seems  difficult  to  justify  the  decisions  which  relieve 
the  shareholders  from  the  liabilities  of  partners.  The 
argument  that  they  should  not  be  held  liable  because 
they  did  not  intend  to  assume  the  liability  of  partners 
is  not  conclusive,  because  it  has  always  been  held  that 
while  partnership  is  a  relation  which  must  be  intended, 
the  intent  is  to  be  inferred  from  the  man's  acts  and 
not  from  his  declarations,  and  that  if  the  facts  show  that 
he  intentionally  assumed  a  relation  to  which  the  law 
ordinarily  attaches  the  obligations  of  partners,  the 
fact  that  he  also  intended  not  to  be  personally  liable 
for  the  debts  of  the  organization  or  expressly  declared 
that  he  was  not  to  be  considered  a  partner  will  not  be 
sufficient  to  prevent  the  organization  from  being  a 
partnership.  If  unincorporated  associations  are  ever 
fully  recognized  by  the  courts  as  in  a  class  intermediate 
between  partnership  and  corporation  those  who  at- 
tempt to  incorporate  and  wholly  fail  may  properly  be 
included  in  that  new  classification.  In  the  present 
state  of  the  law,  however,  since  they  clearly  do  not 
belong  among  the  non-profit  associations,  in  States 
where  it  is  held  that  these  groups  are  not  partnerships, 
they  must  be  treated  as  an  unassociated  group. 

1  Fay  V.  Noble,  7  Cush.  189;  Ward  v.  Brigham,  127  Mass.  24. 
191 


§  52]  UNASSOCIATED   GROUPS  [Chap.  IV 

§  52.  Tenants  in  Common 

Tenants  in  common  of  property  as  well  as  joint  ten- 
ants may  be  numerous  and  may  contract  jointly  with 
others  without  necessarily  becoming  thereby  partners 
in  a  business  enterprise.^  The  title  to  the  personal 
property  of  a  firm  at  conamon  law  vests  in  the  firm  as  an 
entity,  but  title  to  real  estate  vests  in  the  individual 
partners  as  joint  tenants  or  tenants  in  common,  so  that 
the  law  of  partnership  is  intimately  connected  with 
that  of  the  subject  of  this  section.  Moreover,  tenants  in 
common  sometimes  change  their  relation  into  that  of 
partners,  in  which  case  they  may  or  may  not  con- 
tribute the  common  property  as  capital  of  the  partner- 
ship. It  is  frequently  a  difficult  question  of  fact  to 
determine  whether  or  not  joint  owners  have  become 
partners.^  Ships  are  often  built  by  contributions  from 
a  large  number  who  take  shares  in  the  ship.  In  the 
absence  of  further  agreement  creating  a  partnership 
these  owners  are  merely  tenants  in  common.^  In  some 
cases  an  element  of  association  was  involved,  but  as  the 
trading  element  in  the  business  was  lacking  they  were 
held  not  partnerships.^    Numerous  parties  may  be  ten- 

1  A  subscription  agreement  to  "take  stock"  in  a  hotel  running  to 
the  promoter  on  whicli  he  agreed  to  pay  seven  per  cent,  was  held  to  con- 
template that  the  shares  should  represent  an  interest  in  the  real  estate 
on  which  in  lieu  of  rent  tlie  promoter  agreed  to  pay  interest.  Near  v. 
Donnelly,  80  Mich.  130,  130,  44  N.  W.  1118. 

2  See  §  17. 

»  Thorndike  v.  Dc  Wolf,  0  Pick.  120;  French  v.  Price,  24  Pick.  13; 
Mitch(;ll  V.  Chambers,  43  Mich.  150,  5  N.  W.  57;  Munsford  v.  Nicholl, 
20  Jolins.  Gil  (N.  Y.). 

''  Owners  of  separate  parts  of  a  mining  irrigation  ditch  joined  an 
association  and  recorded  the  articles  subject  to  amendment  by  a  two- 
thirds  vote.  No  ])rovision  for  withdrawal  of  m(>ml)ers  or  dissolution. 
Certain  TturmlxTs  fonnaliy  withdrew  while  still  owning  their  part  of  the 
ditf;h  and  rcjfusfid  to  pay  share!  of  e,\])enses  of  ui)keeii  as  assumed  by  the 
association.    The  otiier  tcinants  in  common  i)roceeded  under  a  statute 

1U2 


Chap.  IV]  TENANTS   IN   COMMON  [§  52 

ants  in  common  of  grain  in  an  elevator  before  division 
has  actually  been  made.^ 

By  statute  in  most  States,  a  conveyance  not  expressly 
describing  the  grantees  as  joint  tenants  will  create  a 
tenancy  in  common.  This  is  to  avoid  a  characteristic 
of  joint  tenancy  which  is  its  chief  distinction  from  ten- 
ancy in  common,  viz.,  the  vesting  of  title  in  the  sur- 
vivors on  the  death  of  one  owner.  Though  there  are 
some  other  distinctions  between  the  two  kinds  of  own- 
ership inherited  from  the  mediaeval  law  of  real  prop- 
erty they  are  of  slight  consequence  in  modern  business 
transactions.  One  common  characteristic  of  both  forms 
of  tenancy  is  that  the  interest  of  the  owner  is  an  undi- 

to  enforce  a  lien  for  such  disbursements.  Held:  Not  intended  by  the 
articles  that  a  member  could  withdraw.  It  differs  from  a  commercial 
partnership  or  a  joint  stock  company.  The  association  can  only  be  dis- 
solved by  two-thirds  of  the  shares  or  for  good  cause  shown.  Strang  v. 
Osborne,  42  Col.  187,  94  Pac.  320. 

Land  was  bought  by  subscription,  the  contracts  providing  that  the 
lots  should  be  divided  among  the  subscribers  in  such  way  as  the  majority 
should  decide.  Held :  The  transactions  at  the  meetings  of  the  subscrib- 
ers can  be  proved  by  parol.  It  was  but  a  temporary  association.  The 
fact  that  the  secretary  left  some  memoranda  of  their  doings  is  immaterial. 
Though  each  subscriber  signed  a  separate  contract,  they  were  identical 
and  are  to  be  construed  as  one.  Under  it  the  majority  were  constituted 
their  agents  to  divide  the  lots.  Selling  the  preference  of  choice  of  lots 
at  auction  was  within  their  power  and  bound  the  defendant  though  he 
did  not  attend  the  meeting  when  it  was  adopted.  His  presence  was  not 
necessary  to  vahdate  the  act  of  his  agent.  Morey  v.  Clopton,  103  Mo. 
App.  368,  379,  77  S.  W.  467. 

A  number  of  miU  owners  associated  themselves  by  agreement  to 
construct  a  reservoir.  Their  ownership  was  represented  by  shares 
and  under  the  terms  of  the  contract  a  majority  of  shares  was 
to  decide  questions  as  to  the  flow  of  the  water  for  use  of  the  share- 
holders. Defendants  own  majority  of  shares  and  do  not  want  to  pay 
to  keep  up  the  reservoir,  as  they  own  no  mills.  They  let  the  water 
run  to  waste  unless  plaintiff  will  pay  for  it.  Suit  for  injunction. 
Held:  Shareholders  are  tenants  in  common  owning  undivided  shares. 
In  exceptional  cases  like  this  the  court  will  interfere  to  prevent  waste 
by  a  tenant  in  common.  Under  the  contract  the  right  to  regulate  is 
for  use,  not  for  waste.  Injunction  granted.  BaUou  v.  Wood,  8  Cush. 
48,  51. 

^  Tenants  in  common  of  grain  in  elevator.  Sexton  v.  Graham,  53 
la.  181,  4  N.  W.  1090;  Cushing  v.  Breed,  14  Allen  376. 

193 


§  52]  UNASSOCIATED   GROUPS  [Chap.  IV 

vided  share  in  the  whole  of  the  property,  which  share 
is  freely  transferable,  though  upon  transfer  by  a  joint 
tenant  his  grantee  becomes  thereby  only  a  tenant  in 
common  with  the  others.*'  All  are  equally  entitled  to 
the  possession  of  the  common  property  and  the  courts 
will  not  disturb  the  possession  of  one  owner  on  the  peti- 
tion of  the  others  unless  on  a  bill  in  equity  it  appears 
that  there  is  danger  of  irreparable  injury  to  the  prop- 
erty or  its  removal  from  the  jurisdiction."  One  co- 
owner  has  no  implied  authority  to  sell  the  share  of  the 
others.^  There  are  difficulties  about  actions  at  law 
between  co-owners  for  conversion  by  detaining  merely,^ 
but  for  destruction  of  the  property, ^°  or  sale  of  the  in- 
terest of  the  others, ^^  an  action  of  tort  will  lie.  ''In 
general  equity  will  not  interfere  between  tenants  in 
common  to  restrain  waste,  on  the  ground  that  one 
tenant  in  common  has  a  right  to  enjoy  as  he  pleases, 
and  that  the  party  complaining  may  relieve  himself  at 
law  by  having  partition,  and  the  court  vdW  not  act 
against  the  legal  title  in  possession  of  a  tenant  in 
common.  The  court  will,  however,  restram  a  tenant 
in  common  in  some  special  cases  of  waste  and  under 
peculiar  circumstances,"  ^^  and  wall  enjoin  obstruction 

6  Messing  v.  Messing,  71  N.  Y.  S.  717,  64  App.  Div.  125;  Denne  v. 
Judge,  11  East  288. 

^  Allen  V.  Harper,  26  Ala.  686;  Southworth  v.  Smith,  27  Conn.  355; 
Conover  v.  Earl,  26  la.  167;  Swartwout  v.  Evans,  37  111.  442. 

8  Goell  V.  Morse,  126  Mass.  480;  Perry  v.  Granger,  21  Neb.  579,  33 
N.  W.  261  (vessel);  Henshaw  v.  Clark,  2  Root.  103.  The  sale  may  be 
ratifiefl.by  the  co-owners.    Putnam  v.  Wise,  1  Hill  234. 

»  Hyde  V.  Stone,  9  Cow.  230  (N.  Y.);   Hurd  v.  Darling,  14  Vt.  214. 

'»  lic<lington  V.  Chase,  44  N.  H.  36  (melting  iron  with  other  iron). 

"  Goell  V.  Morse,  126  Mass.  480  (horse);  Weld  v.  Ohver,  21  Pick. 
559  (vessel);   Hyde  v.  Stone,  7  Wend.  354  (vessel). 

"  Such  as  acts  which  if  continued  would  amount  to  a  destruction  of 
the  i)rf)jKTfy.  A  majority  of  an  as.sociation  owning  a  reservoir  re- 
st raincfl  froiM  l(;tting  the  water  go  to  waste  without  regard  to  the  in- 
tercets  of  the  minority.    Ballou  v.  Wood,  8  Cash.  48,  52. 

194 


Chap.  IV]  TENANTS   IN   COMMON  [§  52 

by  one  tenant  of  the  enjoyment  of  the  common  prop- 
erty by  another.  ^^  The  cases  are  in  conflict  as  to  whether 
a  tenant  in  common  owes  a  fiduciary  obUgation  to  his 
co-tenants. ^^  Most  courts  hold  that  if  he  buys  in  an 
encumbrance  on  the  common  property  he  must  hold  it 
subject  to  the  right  of  his  co-tenants  to  share  in  the 
benefit  of  it  on  payment  of  their  respective  shares  in 
the  cost.^^    On  the  other  hand  it  has  been  held  that  he 

13  One  member  of  a  farmer's  telephone  line  permitted  an  outsider 
to  use  it  too  much  and  the  rest  cut  off  his  connection.  He  sued  for  in- 
junction. Held:  Injunction  granted.  They  were  not  partners  because 
they  did  not  contemplate  profit  or  a  mutual  agency  of  the  members. 
But  tenant  in  common  has  right  to  injunction  against  obstruction  of  his 
enjoyment  of  the  common  property.  If  they  were  not  tenants  in  com- 
mon, their  rights  were  analogous  to  it.  They  have  their  remedy  for  the 
excessive  use  by  plaintiff,  but  not  by  destruction  of  the  property.  Han- 
cock V.  Thorpe,  129  Ga.  812,  60  S.  E.  168. 

1*  Syndicate  lands  were  sold  at  auction  by  holders  of  hens  on  them 
and  two  groups  of  shareholders  bid.  Defendant  bought  on  a  secret 
agreement  to  share  with  certain  other  shareholders,  excluding  the  plain- 
tiff. Several  years  later  when  the  value  had  greatly  increased  the  plain- 
tiff brought  this  bill  to  establish  a  trust  for  his  benefit  on  the  ground 
that  whether  tenants  in  common  or  partners  their  relation  was  fiduciary 
and  defendant  could  not  bid  in  for  himseK  and  exclude  the  plaintiff. 
The  court  in  a  loosely  reasoned  decision  found  that  even  if  there  was 
a  fiduciary  obligation,  it  was  not  violated  and  plaintiff  sued  too  late. 
Starkweather  v.  Jenner,  27  App.  D.  C.  348,  361. 

Plaintiff  organized  an  association  to  buy  land.  He  did  not  disclose 
that  he  was  to  get  a  commission  on  the  sale.  The  purchase  was  made,  but 
later  the  land  was  returned  and  some  of  the  consideration  recovered. 
On  dividing  it  they  discovered  the  plaintiff's  commission  and  deducted 
that  amount  from  his  share.  He  sued  to  recover  it.  Held:  Plaintiff 
cannot  recover.  Whether  their  relation  was  that  of  partners  or  joint 
adventurers  the  fiduciary  obligation  of  the  members  to  each  other  was 
the  same  and  the  plaintiff  was  not  entitled  to  a  secret  profit.  Church  v. 
Odell,  100  Minn.  98,  110  N.  W.  346. 

Tenants  in  common  of  a  lode  who  had  formerly  been  mining  part- 
ners sold  out.  Held:  "There  is  no  relation  of  trust  or  confidence 
between  tenants  in  common  who  had  been  partners  in  the  develop- 
ment of  lode  mining  claims  which  prevents  one  of  them  from  demand- 
ing and  receiving  a  higher  sum  for  his  interest  in  the  property  than  is 
paid  therefor  to  his  co-owners."  Harris  v.  Lloyd,  11  Mont.  390,  405, 
28  Pac.  736. 

'^  Rockwell  V.  Dewees,  2  Black.  613;  Hurley  v.  Hurley,  148  Mass. 
444,  19  N.  E.  545;  Van  Home  v.  Fonda,  5  Johns.  Ch.  388;  Lloyd  v. 
Lynch,  28  Pa.  St.  419;   Downer  v.  Smith,  38  Vt.  464.    See  Barnes  v. 

195 


§  52]  UNASSOCIATED   GROUPS  [Chap.  IV 

is  under  no  fiduciary  obligation  to  his  co-tenants  in 
buying  of  them  their  shares  in  the  common  property. 
The  rule  is  laid  down  by  Chief  Justice  Shaw  in  a  Mas- 
sachusetts case  as  follows: 

''The  court  are  of  opinion  that  the  tenants  in  com- 
mon of  a  vessel,  who  are  not  engaged  jointly  in  the 
employment  of  purchasing  or  building  vessels  for  sale, 
do  not  stand  in  such  a  relation  of  mutual  trust  and  con- 
fidence towards  each  other  in  respect  to  the  sale  of  such 
vessel  that  each  is  bound  in  his  dealings  with  the  other 
to  communicate  all  the  information  of  facts  within  his 
knowledge  which  may  affect  the  price  or  value.  A  dif- 
ferent rule  may  prevail  in  respect  to  any  contract  for 
the  use  or  employment  of  the  common  property  in 
which  relation  perhaps  they  may  be  deemed  to  place 
confidence  mutually  in  each  other.  But  in  common 
cases  of  tenants  in  common  of  a  vessel  they  are  inde- 
pendent of  each  other  in  all  matters  of  purchase  and 
sale  and  may  deal  with  each  other  in  the  same  manner 
as  owners  of  separate  property.  Each  may  act  upon 
the  knowledge  which  he  has  without  communicating  it. 
But  aliud  est  tacers,  aliud  celare.  With  this  advanta- 
geous knowledge,  if  there  be  studied  efforts  to  prevent 
the  other  from  coming  to  the  knowledge  of  the  truth,  or 
if  there  be  any  through  slight,  false  and  fraudulent  sug- 
gestion or  representation,  then  the  transaction  is 
tainted  with  turpitude  and  alike  contrary  to  the  rules 
of  morality  and  law."  ^'^ 

Tenants  in  common  of  a  mine  who  did  not  become 
partners  in  working  it  were  held  entitled  nevertheless 

Hoiinlrnan,  ir)2  Mass.  .391,  25  N.  E.  623;  Turner  v.  Sawyer,  150  U.  S. 
.578,  .37  L.  vil.  1189,  14  S.  Ct.  192;  Burgctt  v.  TaUaforo,  118  111.  503,  9 
N.  E.  334. 

»•  Matthews  V.  Bliss,  22  Pick.  48,  .52. 

190 


Chap.  IV]  COMMON  AGENTS  [§53 

to  an  accounting. ^^  In  some  States  a  tenant  in  com- 
mon may  proceed  in  equity  to  compel  his  co-tenant  to 
contribute  to  necessary  repairs. ^^  Though  tenants  in 
common  of  personalty  at  common  law  have  no  right 
to  partition,  a  court  of  equity  will  enforce  appropriate 
relief. ^^  If  the  property  is  severable  in  its  nature,  each 
tenant  may  appropriate  his  own  share. ^°  A  majority 
in  value  of  the  tenants  in  common  of  a  vessel  may  con- 
trol the  employment  of  it,  but  a  court  of  admiralty  will 
require  them  to  give  security  for  its  return  to  a  dissent- 
ing minority.^^  It  has  been  held  that  where  the  in- 
terests of  disputing  owners  are  equal  and  a  controversy 
as  to  the  use  of  the  ship  has  been  decided,  a  court  of  ad- 
miralty will  order  a  sale  of  the  share  of  the  owner  who  is 
defeated. ^^  There  are  numerous  cases  holding  that  one 
part  owner  of  a  ship  has  power  to  bind  his  co-owners  in 
contract  for  necessary  repairs  and  supplies,  but  it  would 
seem  that  in  all  of  those  cases  the  owners  were  really 
partners. 

§  53.   Common  Agents 

There  are  occasional  cases  of  groups  dealing  through 
a  common  agent  which  are  not  properly  partnerships, 

"  Kahnw.  Smelting  Co.,  102  U.  S.  641,  646,  26  L.  ed.  266;  Howard 
V.  Luce,  171  Fed.  584  (C.  C.  —  N.  Y.). 

1*  Alexander  v.  Ellison,  79  Ky.  148;  Stevens  v.  Thompson,  17  N.  H. 
103;  Taylor  v.  Baldwin,  10  Barb.  582  (N.  Y.);  Munford  v.  Brown,  6 
Cow.  475  (N.  Y.);  Beaty  v.  Bordwell,  91  Pa.  St.  411;  Farrand  v.  Glea- 
son,  56  Vt.  633;  Ward  v.  Ward,  40  W.  Va.  611,  21  S.  E.  746;  McDear- 
man  v.  McClure,  31  Ark.  559. 

An  action  on  the  case  for  damages  for  failure  to  repair  was  denied. 
It  was  said  the  remedy  was  by  partition.  Calvert  v.  Aldrich,  99  Mass. 
74,  79;   Leigh  v.  Dickeson,  15  Q.  B.  D.  60. 

19  Willard  v.  Willard,  145  U.  S.  116,  36  L.  ed.  644,  12  S.  Ct.  818; 
Godfrey  v.  White,  60  Mich.  443,  27  N.  W.  593;  Barney  v.  Leach,  54 
N.  H.  128;  Kennedy  v.  Boykin,  35  S.  C.  61,  14  S.  E.  809. 

20  Fobes  V.  Shattuck,  22  Barb.  568. 

21  The  Orleans  v.  Phoebus,  11  Pet.  178;  The  ApoUo,  1  Hagg.  311. 

22  The  Annie  H.  Smith,  10  Ben.  110;  Coyne  v.  Caples,  7  Sawyer  360. 

197 


§  53]  UNASSOCIATED  GROUPS  [Chap.  IV 

but  which  do  not  fall  in  any  of  the  foregoing  classifica- 
tions. In  one  early  case  a  number  of  men  entered  into 
a  speculation  in  tea.  They  all  employed  a  certain 
broker  to  buy  a  lot  of  tea  at  a  sale  of  the  East  India 
Company,  the  lots  being  in  general  too  large  for  any 
one  dealer.  The  broker  issued  warrants  similar  to 
warehouse  receipts  for  the  proportionate  share  of  each 
in  the  tea  and  pledged  these  warrants  with  the  plain- 
tiff as  security  for  a  loan  to  carry  the  tea  until  it  could 
be  sold.  The  price  of  tea  dropped,  and  the  broker  be- 
came bankrupt,  as  did  others  to  whom  the  warrants  had 
been  issued.  The  bankers  sued  the  defendants  for  the 
whole  balance  of  the  loan  as  partners  with  the  others. 
The  defendants  had  paid  the  broker  the  full  amount  for 
their  share  of  the  tea  and  it  appeared  that  there  had 
been  no  joint  arrangement  about  the  resale  of  the  tea. 
There  was  a  verdict  for  the  defendant  and  a  motion  for 
a  new  trial  was  refused.^ 

^  Hoare  v.  Dawes,  1  Douglass  371. 

A  stock  pool  was  organized  with  certain  brokers  as  agents  who  were 
to  buy  the  stock  and  pay  for  it  and  then  deliver  it  to  members  who  were 
to  pay  for  their  shares.  Vice  versa  on  sales.  When  agent  and  one 
member  failed  the  same  day  and  the  agent  was  unable  to  take  stock  it 
had  bought  but  made  no  demand  on  the  members,  the  receiver  of  the 
insolvent  member  was  not  liable  to  the  trustee  in  bankruptcy  of  the 
agent  for  his  share  either  of  the  purchase  price  or  of  the  loss  on  resale  by 
the  vendors.  Re  Lathrop  Haskins  &  Co.,  216  Fed.  102,  100  (C.  C.  A. 
—  N.  Y.). 


198 


CHAPTER  V 

NON-PROFIT  ASSOCIATIONS 

§  54.   Definition 

The  kinds  of  association  considered  in  this  chapter 
are  very  different  in  their  legal  status  from  those  we 
have  previously  discussed.  Their  underlying  princi- 
ples are  derived  from  the  law  of  agency  and  not  from 
the  law  of  partnership.  Yet  they  are  true  associations 
and  cannot  properly  be  classified  with  the  trusts  and 
the  joint  contractual  relations  already  considered. 
Because  they  are  true  associations  and  frequently  have 
to  do  with  commercial  rather  than  social  affairs  it  is 
not  always  easy  to  distinguish  them  from  partnerships. 
An  illustration  of  this  is  the  stock  exchange,  a  mighty 
factor  in  big  business.  Its  members  are  actively  en- 
gaged in  business  for  profit  under  the  auspices  of  the 
exchange,  but  it  is  their  individual  business  and  not 
that  of  the  association.  As  was  said  in  a  leading  case, 
*Hhe  exchange  is  not  a  partnership  and  the  plaintiff  is 
not  entitled  to  the  equitable  remedies  of  partners.  It 
is  not  a  union  of  persons  joining  together  property, 
labor  or  skill  for  their  common  benefit  in  any  pursuit  or 
business  having  a  communion  of  profit  and  loss  and 
distinguishable  by  the  feature  that  if  earned  there  is 
to  be  a  division  of  gains.  It  may  be  described  as  an 
association  of  persons  engaged  in  the  same  line  of  busi- 
ness who  have  organized  together  for  the  purpose  of 
establishing  certain  rules  by  which  each  agrees  to  be 
governed  in  the  conduct  and  management  of  his  sepa- 

199 


§  54]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

rate  transactions  or  business;  which  is  not  a  partner- 
ship." ^  At  the  other  extreme  is  the  social  club  -  with 
its  constitution  and  by-laws,  —  a  simple  association 
that  affords  few  problems  for  the  la'^'^^er,  and  yet  occa- 
sionall}'  appears  in  the  reports,  usually  in  bitter  con- 
tests over  membership.  No  one  ever  contends  that 
these  associations  are  partnerships.  Intermediate 
between  them  come  religious  societies,^  fraternal  or- 

1  White  V.  Bro^meU,  2  Daly  329  (N.  Y.). 

-  Richmond  v.  Judy,  6  Mo.  App.  465,  468. 

"Unincorporated  societies  have  long  held  in  this  State  an  interme- 
diate position  between  corporations  and  partnerships."  Liederkranz 
Society  v.  Germania  Tum-Verein,  163  Pa.  St.  265,  268,  29  Atl.  918. 

3  Kerr  v.  Hicks,  154  N.  C.  267,  268,  70  S.  E.  468  (convention  of 
churches);  Queen  v.  Robson,  16  Q.  B.  D.  137  (Y.  M.  C.  A.). 

See  a  curious  dictimi  that  members  of  an  unincorporated  church 
are  Mable  on  its  contracts  as  joint  promissors  or  partners.  Thurmond 
V.  Cedar  Church,  110  Ga.  816.  36  S.  E.  221. 

Plaintiff  joined  a  reUgious  community  called  Koreshan  Unity  and 
contributed  her  property  to  the  common  fund,  recei\Tng  for  it  a  note 
signed  by  the  leader  of  the  flock  and  his  assistant  "for  the  Koreshan 
Unity."  She  was  to  enforce  this  whenever  she  decided  to  leave  the  com- 
munity. Held :  An  action  on  the  note  against  members  of  the  colony  as 
partners  cannot  be  maintained.  If  it  was  a  partnership,  it  was  not  a 
trading  firm  and  there  was  no  implied  authority  to  issue  notes.  It  was 
not  a  partnership  because  not  carried  on  for  business  purposes,  but  for 
reHgious  and  social  purposes.  It  was  more  like  a  tenancy  in  common 
or  club.  There  was  no  evidence  of  authorization  or  ratification  bj-  the 
other  members.     Teed  v.  Parsons,  202  111.  455,  460,  66  N.  E.  1044. 

In  Massachusetts  before  the  Revolution  and  for  some  time  after 
reUgious  societies  or  parishes  were  coiporations,  at  first  identical  with 
the  touTis  themselves,  and  for  a  long  time  even  after  the  Revolution 
regulated  by  statute  hke  to^^^^s.  Within  this  corporation,  called  the 
"society,"  was  an  unincorporated  association  called  the  "church,"  which 
partook  of  the  Lord's  Supper  and  performed  other  religious  rites  to 
which  other  members  of  the  society  were  not  admitted.  Weld  v.  May,  9 
Cush.  181,  184.  As  a  curious  exception  to  the  law  of  corporations  an  ex- 
ecution again.st  a  to^\'n  or  territorial  parish  in  Massachusetts  could  be 
levied  on  the  property  of  individual  members  thereof.  Chase  v.  Prcnder- 
gast,  19  Pick.  564.  The  law  was  amended  to  permit  the  formation  of  poll 
parishes  not  on  a  territorial  basis.  These  were  at  first  corporations  but 
might  also  be  unincory)oruted  associations,  which,  in  the  absence  of  any 
restriction  in  their  articles  of  association,  had  full  power  to  regulate  by 
by-law  the  tenns of  their  membership.  Taylor  v.  Edson,  4  Cush.  522, 526. 

Informal if)n  against  officers  of  the  Hollis  Street  Church  to  determine 
the  right  in  funds  derived  from  contributions  and  other  donations  not 
specifically  appropriated  and  accumulations  of  interest.    The  church 

200 


Chap.  V]  DEFINITION  [§  54 

ders,^  mutual  benefit  societies '"  with  and  without  insur- 

of  which  they  were  officers  was  a  voluntary  association  connected  with 
the  reUgious  society,  which  was  a  corporation.  "It  may  be  a  question, 
then,  how  such  a  voluntary  association  can  act,  subsist,  and  enjoy 
rights  and  privileges;  or,  in  other  words,  how  its  certainty,  identity, 
and  perpetuity  can  be  known  and  established.  The  answer  is,  that  it 
subsists  and  acts,  and  possesses  these  qualities,  because  it  is  incident 
to,  and  inseparably  connected  with,  and  dependent  on,  a  body,  which 
has  certainty,  identity,  and  perpetual  succession  by  an  act  of  incor- 
poration. The  identity  of  a  church  is  determined  by  the  identity  of 
the  incorporated  rehgious  society  within  which  it  is  gathered ;  and  such 
church,  although  a  merely  voluntary  association,  has  perpetuity  through 
its  connection  with  a  corporation  which  has  perpetual  succession.  If, 
therefore,  all  the  members  of  a  church  should  die,  or  withdraw,  any 
number  of  the  members  of  the  same  society,  forming  themselves  into 
church  order,  for  the  celebration  of  the  ordinances,  either  by  the  spon- 
taneous movement  of  such  members  themselves,  or  under  the  advice, 
and  at  the  caU  of  neighboring  churches,  such  association  would  be  the 
church  of  the  society,  identical  with  the  church  formerly  subsisting; 
and  upon  the  orderly  choice  of  deacons,  they  would  be  competent  to 
take  and  hold  property  given  to  the  church,  and  would  be  the  regular 
successors  of  any  former  deacons;  and  if  need  be,  might  maintain  suits 
for  the  recovery  of  any  such  property."  This  capacity  to  take  in  suc- 
cession was  given  by  statute  in  1754.  It  was  not  necessary  to  give 
effect  to  a  grant  to  a  deacon  of  a  chm'ch,  if  he  was  Uving  at  the  death 
of  the  testator,  because  he  would  then  take  in  his  personal  capacity 
and  on  his  death  it  would  descend  to  his  heirs,  but  the  statute  was 
necessary  in  order  that  it  might  pass  to  his  successor  in  office;  that  is, 
the  deacons  were  reaUy  made  a  corporation  with  pei-petual  succession 
for  that  pui-pose,  although  the  members  of  the  church  were  not  a  cor- 
poration. The  members  of  the  church  were  the  beneficiaries.  This 
biU  was  dismissed,  however,  because  it  did  not  appear  to  be  brought 
at  the  instance  of  the  church  or  a  majority  of  its  male  members,  but.  at 
the  relation  of  one  member  only,  which  is  insufficient  in  the  case  of  a 
private  charity.    Parker  v.  May,  5  Cush.  336,  345. 

The  connection  of  a  congregation  with  its  church  corporation  may 
be  severed  without  loss  of  identity.  Holt  v.  Downs,  58  N.  H.  170,  172. 
Many  churches  in  Massachusetts  are  now  unincortjorated.  An  unin- 
corporated rehgious  society  in  Massachusetts  could  acquire  title  to 
real  estate  by  disseisin  because  since  1811  such  associations  had  been 
given  by  statute  for  the  purpose  of  taking,  holding  and  transmitting 
property,  all  the  attributes  of  a  corporation.  Fu'st  Church  v.  Harper, 
191  Mass.  196,  207,  77  N.  E.  778. 

In  the  other  New  England  States  and  New  York,  New  Jersey  and 
South  Carolina  churches  are  usually  incorporated.  In  the  remaining 
States  they  are  more  often  unincorporated.  Since  1731  in  Pennsyl- 
vania reUgious  associations  have  been  recognized  as  having  associate 
and  quasi  coi-porate  existence  at  law.    Phipps  v.  Jones,  20  Pa.  260,  263. 

*  Held:  Not  partnerships.  Ferris  v.  Thaw,  5  Mo.  App.  279,  286. 
Ash  V.  Guie,  97  Pa.  St.  493,  498. 

5  Not  partnership.     Burke  v.  Roper,  79  Ala.  138,  142;  Laford  v. 

201 


§  54]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

ance  features,  professional  organizations  and  temporary 
public  organizations,^  which  are  plainly  not  partner- 
ships, and  the  socialistic  communities,^  "farmer's  tele- 
phone lines,"  ^  trade  unions,^  and  employers'  associa- 

Deems,  81  N.  Y.  507,  514;  Robertson  v.  Walker,  3  Baxt.  (Tenn.)  316, 
318. 

The  contract  right  of  members  is  not  an  insurance  contract,  but  in 
a  sense  they  are  beneficiaries  of  a  trust.  Pirics  v.  First  Russian  Soc, 
83  N.  J.  Eq.  29,  89  Atl.  1036. 

"A  mutual  benefit  association  partakes  of  the  nature  of  a  partner- 
ship."    Gorman  v.  Russell,  14  Cal.  531,  539. 

In  one  case  the  court  talked  as  though  an  insurance  order  was  a 
partnership,  though  with  limited  liabihty.  Hammerstein  v.  Parsons, 
38  Mo.  App.  332,  335. 

Mutual  benefit  societies  have  a  twofold  character  —  social  or- 
ganization, mutual  insurance  company.  Members  to  whom  benefit 
certificates  are  issued  acquire  property  rights,  in  deahng  with  which 
it  is  important  that  courts  confine  themselves  strictly  to  the  terms  of 
the  contract  the  members  have  made  for  themselves.  Mukoy  v.  Su- 
preme Lodge,  K.  H.,  28  Mo.  App.  463,  471. 

Mitchell,  J.:  "We  agree  with  counsel  for  defendant  that  the  'fluid' 
state,  as  he  terms  it,  is  the  condition  of  many  of  these  benefit  and  fra- 
ternal associations.  Then*  organization  as  well  as  manner  of  doing 
business  is  usually  so  informial  that  it  has  been  the  plague  of  the  courts 
to  define  their  character  and  construe  their  contracts."  Cornfield  v. 
Order  Brith  Abraham,  64  Minn.  261,  263,  66  N.  W.  970. 

A  mutual  insm'ance  society  in  which  each  in  consideration  of  a  pay- 
ment made  to  him  underwrites  a  policy  for  a  stipulated  sum  is  not  a 
partnership.  Strong  v.  Harvey,  3  Bing.  304;  Redway  v.  Sweet,  L.  T. 
2  Ex.  400;  Gray  v.  Pearson,  L.  R.  5  C.  P.  568;  Andrew's  and  Alex- 
ander's Case,  8  Eq.  176. 

«  Ostrom  V.  Greene,  161  N.  Y.  353,  360,  55  N.  E.  919  (informal  asso- 
ciation without  rules  to  raise  money  to  build  a  monument). 

'  Referred  to  as  a  partnership.    Goesele  v.  Bimeler,  14  How.  589,  607. 

8  Moore  v.  Telephone  Co.,  171  Mich.  388,  399,  137  N.  W.  241. 
Held:  Not  a  partnership  but  an  "unincorporated  association"  not 
operated  for  profit  but  for  the  convenience  of  the  members.  Primm  v. 
White,  162  Mo.  App.  594,  142  S.  W.  802. 

The  organization  was  not  a  joint  stock  company  because  it  issued 
no  stock.  It  was  not  a  partnership  because  it  was  not  organized  for 
the  purpose  of  engaging  in  trade  or  business  and  no  profits  were  con- 
t(!mplated.  "An  association  is  defined  to  be  a  body  of  persons  acting 
together  witliout  a  charter,  but  upon  the  methods  and  forms  used  by 
incori)orated  bodies  for  the  prosecution  of  some  common  enterprise." 
This  is  broad  enougli  to  cover  any  such  organization  not  created  for 
the  jjurpose  of  doing  l)usiness  at  a  profit.  Branagan  v.  Buckman, 
122  N.  Y.  S.  610,  alT'd  130  N.  Y.  S.  1106,  145  Ai)p.  Div.  950. 

»  Held:  PartiuT.Hhip.    Patch  Mfg. Co. t^.Capeless,  79  Vt.  1,63  Atl. 938. 

Not  partnership.    Brown  v.  Stoerkel,  74  Mich.  269,  276,  41  N.  W. 

202 


Chap.  V]  DEFINITION  [§  54 

tions/*'  as  to  which  some  confusion  has  arisen,  but  which 
are  now  generally  admitted  to  be  not  partnerships. 
All  of  these  associations  found  their  rights  and  obliga- 
tions on  the  same  underlying  principles  and  will  there- 
fore be  treated  in  this  chapter  together,  but  so  far  as 
possible  the  notes  will  indicate  for  the  benefit  of  the 
practitioner  the  kind  of  association  each  citation  em- 
bodies. 

A  recent  case  illustrates  the  attitude  of  the  courts 
toward  a  form  of  association  that  has  lately  become 
common  and  which  is  on  the  border  line  between  as- 
sociations for  profit  and  non-profit  associations.  The 
inhabitants  of  a  farming  village  started  a  telephone 
exchange,  dividing  the  original  cost  between  them. 
Those  admitted  later  were  required  to  pay  a  fixed  sum 
for  connection  and  to  instal  their  own  outfit.  Each 
member  of  the  association  paid  $2  a  year  for  the  opera- 
tor and  a  proportionate  share  of  the  expense  of  repairs. 

921;  Roofing  Co.  v.  International  Ass'n,  5  Ont.  L.  R.  424,  9  Ont.  L. 
R.  171,  178. 

Action  by  treasurer  of  a  labor  union  for  a  libel  against  the  associ- 
ation. Held:  Partners  cannot  maintain  a  joint  action  for  libel  unless 
it  tended  to  injure  the  business  or  credit  of  the  fLrm.  By  analogy,  this 
association  cannot  recover  here,  since  it  is  not  engaged  in  business. 
Stone  V.  Textile,  etc.  Ass'n,  122  N.  Y.  S.  460,  137  App.  Div.  655. 

1"  Bill  for  dissolution  as  combination  in  restraint  of  trade  because 
the  association  had  made  agreements  with  the  unions  regulating  wages. 
Held:  Not  a  partnership.  "If  it  accumulates  property  incidentally 
in  the  promotion  of  its  real  purpose  that  does  not  change  the  character 
of  the  association."  Lindermann  Co.  v.  Advance  Stove  Works,  170 
lU.  App.  423,  432;  Typothetae  v.  Union,  102  N.  W.  725,  727  (Minn.). 

Members  of  an  association  of  wholesalers  who  bought  goods  of  a 
certain  manufacturer  received  rebates  which  were  paid  by  the  manu- 
facturer to  the  treasurer  of  the  association  and  distributed  by  him 
pro  rata  to  the  members  who  had  pm-chased.  Plaintiff  not  a  member 
of  the  association  sold  some  of  the  same  goods  and  was  promised  by 
the  president  of  the  association  the  rebate.  He  sued  to  recover  it. 
Held:  The  members  of  the  association  were  not  partners.  The  plain- 
tiff had  no  right  to  the  rebates.  The  action  of  the  president  was  un- 
authorized. Midwood  V.  Wholesale  Grocers  Ass'n,  20  R.  I.  152,  37 
Atl.  946. 

203 


§  54]  NOX-PROFIT  ASSOCIATIONS  [Chap.  V 

Each  line  was  entitled  to  one  vote  at  meetings.  As- 
sessments were  to  be  levied  whenever  the  treasury 
fmids  got  low.  There  was  a  provision  for  quorum  at 
meetings.  By  an  amendment  of  the  by-laws,  when 
a  farmer  sold  his  house  the  purchaser  acquired  his 
rights  in  the  phone  and  membership  in  the  association 
without  anj'thing  further.  The  association  did  busi- 
ness and  got  credit  under  the  name  of  the  Waldron  Tel- 
ephone Exchange.  A  neighboring  telephone  exchange 
which  was  incorporated  finally  acquired  the  rights  of 
what  it  claimed  to  be  a  majority  of  the  members  of  the 
association,  gi'V'ing  them  stock  in  the  corporation  in 
exchange,  and  maintaining  their  telephone  connection, 
and  took  possession  of  the  association  and  its  property. 
The  others  brought  a  bill  against  it  for  an  accounting. 

The  court  below  decided  for  the  corporation.  This 
was  reversed  on  appeal. 

"The  by-laws  of  the  association  provide  for  admit- 
ting members  but  not  for  dismissing  them.  In  a  co- 
partnership the  withdrawal  of  a  member  generally 
works  a  dissolution.  In  a  joint  adventure  which  is 
neither  a  partnership  nor  joint  stock  company  the 
fact  of  the  withdrawal  of  a  member,  there  being  no  ex- 
press agreement  on  the  subject,  would  not  ordinarily 
work  a  dissolution.  The  practice  of  permitting  the 
one  who  purchased  the  property  and  the  telephone  of 
the  member  of  the  complainant  association  to  'step 
into  the  shoes  of  the  man  he  bought  of  seems  not  to 
have  been  intended  as  a  recognition  of  the  right  of  the 
withdrawing  member  to  sell  an  interest  in  the  associa- 
tion, but  merely  as  the  receipt  of  a  new  member  in 
place  of  the  one  going  out. 

"As  a  gonoral  rule  there  can  be  no  partnership  where 

204 


Chap.  V]  DEFINITION  [§54 

parties  have  not  by  agreement  created  one.  This  may 
be  said  also  of  joint  stock  companies  and  indeed  of  all 
joint  adventm-es.  They  are  with  greater  or  less  particu- 
larity agreed  to  by  the  adventurers. 

"A  joint  stock  company  has  been  defined  as  an  asso- 
ciation of  individuals  for  purposes  of  profit  possessing 
common  capital  contributed  by  the  members  compos- 
ing it,  which  said  capital  is  commonly  divided  into 
shares  of  which  each  member  possesses  one  or  more, 
and  which  are  transferable  by  the  owners.  (Shelford 
on  Joint  Stock  Companies,  1.  Bouvier's  Law  Diction- 
ary.) The  complainant  association  never  had  any 
capital  and  never  had  any  shares  of  stock.  As  between 
the  members  it  was  not  a  corporation,  a  partnership  or 
a  joint  stock  association.  It  was  not  organized  for 
profit,  neither  was  it  a  club  or  other  social  or  benevo- 
lent institution.  It  was  not  intended  by  those  asso- 
ciating that  the  withdrawal  of  a  member  should  work  a 
dissolution  of  the  association  or  that  any  interest  should 
be  transferable  except  when  a  member  did  in  fact  sell 
his  home  or  place  of  business  and  his  telephone.  The 
purchaser  might,  as  owner,  become  a  member  if  he 
cared  to  do  so.  It  was  intended  and  agreed  that  the 
internal  affairs  of  the  association  should  be  controlled 
directly  by  its  officers  rather  than  by  a  majority  of  its 
members.  There  is  no  reason  why  these  mutual  and 
innocent  agreements  and  understandings  of  members 
should  not  be  given  effect,  and  we  find  in  them  and  in 
the  business  carried  on  no  foundation  for  the  claim  that 
less  than  all  of  the  members  may,  by  withdrawal  or  by 
an  attempted  transfer  of  interests  to  a  third  party,  com- 
pel either  a  sale  of  the  property  of  the  association  or  a 
dissolution.    We  are  not  required  to  give  the  association 

205 


§  54]  NON-PROFIT   ASSOCIATIONS  [Chap.  V 

a  name  indicating  its  legal  status.  It  is  a  joint  adven- 
ture. For  purposes  of  judicial  control  we  regard  it  as 
nearest  like  a  partnership.  If  there  are  reasons  growing 
out  of  internal  dissensions  or  debts  or  a  failure  to  secure 
the  joint  benefit  sought  for  by  the  associates  for  the 
interference  of  a  portion  of  its  members  in  behalf  of  all 
of  them  in  judicial  proceedings,  we  have  no  doubt  of 
the  power  of  the  Court  of  Chancery  to  investigate  and 
to  grant  relief  as  it  would  do  in  the  case  of  a  partner- 
ship. No  such  action  could  be  taken  by  the  Hillsdale 
Telephone  Company,  which  is  not  and  cannot  become  a 
member  of  the  complainant  association.  It  is  recited 
in  the  decree  as  one  of  the  premises  for  the  release 
granted  that  there  has  been  such  dissension  among  the 
interests  of  Waldron  Telephone  Exchange  as  to  render 
its  further  continuance  improfitable  and  unsatisfac- 
tory under  the  present  conditions,  and  to  require  its 
dissolution. 

"There  is  perhaps  some  testimony  tending  to  prove 
dissensions,  but  there  is  little  evidence  of  dissension 
with  respect  to  the  internal  affairs  of  complainant  asso- 
ciation. We  have  stated  the  cause  of  the  trouble.  It 
was  found  by  the  trial  court  that  the  Hillsdale  County 
Telephone  Co.  is  the  owner  of  a  majority  of  the  stock 
and  interests  of,  in  and  to  the  Waldron  Telephone  Ex- 
change. We  hold  it  is  not  such  owner;  that  it  is  wrong- 
fully in  possession  of  the  property  of  the  Waldron  Tele- 
phone Exchange,  and  should  account  for  its  use  to  the 
Association.  Those  members  of  the  Waldron  Tele- 
phone Exchange  who  have  formerly  transferred  their 
interests  to  defendant  are  for  the  purposes  of  this  case 
regarded  as  still  members  of  such  exchange.  We  do 
not  find  evidence  which  convinces  us  that  the  members 

20G 


Chap.  V]  DEFINITION  [§54 

of  the  Waldron  Telephone  Exchange  desire,  because  of 
its  insolvency  or  mismanagement,  its  dissolution  and  a 
sale  of  its  assets,  or  that  there  is  such  cause  as  in  case  of 
a  partnership  would  require  its  dissolution."  ^^ 

It  sometimes  happens  that  an  association  originally 
organized  for  some  purpose  other  than  profit  departs 
from  its  first  purpose  and  engages  in  business.  In  such 
cases,  when  once  it  is  found  as  a  fact  that  the  associa- 
tion is  in  business  for  the  purpose  of  gain,  the  rules  of 
partnership  apply. ^^ 

Organizations  for  all  the  purposes  above  mentioned 
to-day  are  usually  incorporated,  except  social  clubs, 
stock  exchanges  and  trade  unions.  When  incorporated, 
however,  they  organize  under  statutes  distinct  from 
those  authorizing  business  corporations.  The  statutes 
regulating  incorporated  benefit  societies  are  usually 
elaborate,  but  the  others  are  seldom  so.  The  general 
law  applicable  to  such  corporations  differs  in  many  re- 
spects from  that  relating  to  business  corporations.  To 
a  large  extent  it  is  not  different  from  the  rules  applica- 
ble to  non-profit  associations  discussed  in  this  chapter 
and  the  cases  are  frequently  cited  indiscriminately, 
though  it  has  been  said  by  an  eminent  judge  that  the 
rights  of  members  of  a  corporation  depend  on  the  stat- 
utes creating  the  corporation  and  such  cases  are  not 

11  Moore  v.  Telephone  Co.,  171  Mich.  388,  399,  137  N.  W. 
241. 

12  The  court  was  unable  to  tell  on  the  facts  whether  an  athletic 
association  was  a  partnership  or  not.  O'Rourke  v.  Kelley,  the  Printer 
Corp.,  156  Mo.  App.  91,  135  S.  W.  1011. 

A  missionary  society  was  held  a  partnership  because  engaged  in 
the  sale  of  rehgious  books  at  a  profit.  Slaughter  v.  American  Baptist 
Missionary  Soc,  150  S.  W.  224,  227  (Tex.). 

Members  of  a  social  club  carrying  on  business  are  not  hable  unless 
they  authorized  the  obUgation.  Apparently  held  hable  because  they 
knew  business  was  being  conducted.  Fetner  v.  American  National 
Bank,  84  S.  E.  185  (Ga.). 

207 


§  55]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

authorities  in  the  case  of  an  unincorporated  associa- 
tion.^^ The  citations  in  this  chapter,  however,  will  be 
confined  to  unincorporated  associations  except  when 
otherwise  indicated. 

The  principal  differences  between  the  incorporated 
and  unincorporated  non-profit  associations  resemble 
those  between  partnerships  and  business  corporations, 
arising  out  of  the  full  recognition  by  the  courts  of  the 
entity  of  the  corporation  and  incomplete  recognition 
of  the  entity  of  the  unincorporated  association.  There 
is  uncertainty  as  to  the  riiles  regarding  legal  title  to 
property  of  unincorporated  associations,  whereas  the 
law  as  to  the  title  to  property  of  corporations  is  clear. 

Unincorporated  associations  apart  from  statute  ap- 
pear in  court  through  individual  members,  corporations 
in  the  corporate  name.  The  members  of  corporations 
are  not  ordinarily  individually  liable  for  its  debts, 
whereas  members  of  unincorporated  associations  may 
be  liable  on  principles  of  agency  for  debts  authorized 
or  ratified,  and  the  remedy  of  members  for  deprivation 
of  rights  is  properly  in  equity,  and  not  at  law. 

§  55.  Admission  of  Members 

Disputes  frequently  arise  as  to  who  are  members  of 
informal  associations.  The  facts  upon  which  these  cases 
are  decided  are  of  great  variety.^ 

"  Lurton,  J.,  in  Nance  v.  Busbv,  91  Tenn.  303,  320,  18  S.  W. 
874. 

1  Membership  was  held  a  question  of  fact  for  the  jury.  Defendant 
had  been  advertised  as  an  officer.  Murray  v.  Walker,  83  la.  202,  48 
N.  W.  1075. 

Action  of  slander  by  voluntary  association.  Defendant  set  up  that 
Bome  of  flic  ])luintiffs  who  were  named  as  individuals  were  not  mem- 
bers and  that,  tlu^refore,  the  action  failed.  Held:  Question  of  fact  for 
jury  wlicther  they  were  members  or  not.  Signing  constitution  and 
paying  fee  or  attending  meetings  after  this  was  done  for  him  by  an- 

208 


Chap.  V]  ADMISSION   OF   MEMBERS  [§  55 

The  association  has,  of  course,  the  right  to  determine 
the  Hmitations  of  its  membership.  On  a  bill  in  equity 
to  compel  a  labor  union  to  admit  two  workmen  the 
court  said:  ''The  very  idea  of  such  an  organization  is 
association  mutually  acceptable  and  in  accordance  with 
regulations  agreed  upon,  a  power  to  require  the  admis- 
sion of  a  person  in  any  way  objectionable  to  the  society 
is  repugnant  to  the  scheme  of  its  organization.  .  .  . 

other  was  aU  evidence  to  be  considered.  Smith  v.  HoUister,  32  Vt. 
695,  704. 

The  constitution  of  an  agricultural  association  provided  that  ex- 
hibitors at  its  fairs  should  buy  tickets  making  them  members.  In  an 
action  under  a  statute  for  a  debt  of  the  association  it  was  held  still 
open  to  defendant  to  show  that  the  tickets  though  stamped  "Member- 
ship" were  delivered  and  taken  as  admission  tickets  only.  Tarbell  v. 
GiiTord,  82  Vt.  222,  72  Atl.  921. 

Ownership  of  a  pew  is  at  least  evidence  of  membership  in  a  religious 
society,  and  when  no  other  than  pew  holders  are  able  to  prove  their 
membership  they  may  be  deemed  the  beneficiaries.  Attorney  General 
V.  Federal  St.,  3  Gray  145. 

When  members  seceded  from  a  church  and  built  a  new  one,  but  later 
returned,  they  were  still  members  of  the  original  church.  The  original 
trustees  of  the  society  continued  to  hold  title  for  it.  Peterson  v.  Sam- 
uelson,  42  Neb.  161,  164,  60  N.  W.  347. 

Withdrawal  from  the  place  of  worship  and  estabhshing  another  is 
not  necessarily  withdrawal  from  the  society.  Feny  v.  Tupper,  74 
N.  C.  722.  See  Peterson  v.  Samuelson,  42  Neb.  161,  164,  60  N.  W. 
347. 

Majority  of  walnut  gi'owers'  association  formed  corporation  and 
took  over  its  property.  Fom*  dechned  to  recognize  the  corporation 
and  took  in  four  more  and  now  claim  to  be  the  association  and  entitled 
to  its  property,  on  the  theory  that  the  others  have  withdrawn.  No 
formal  withdrawal  occurred.  It  was  found  as  a  fact  below  that  they 
did  not  withdraw.  Held:  Plaintiff's  case  fails  because  it  was  found 
that  defendant  had  not  withdrawn.  They  clearly  did  not  intend  to 
part  with  right  m  the  property.  They  may  have  intended  to  destroy 
the  association  and  may  have  failed,  but  did  not  intend  to  withdraw. 
Strong  V.  Growers'  Ass'n,  137  Cal.  607,  610,  70  Pac.  734. 

Where  a  stock  exchange  reorganized  and  transferred  its  assets  to  a 
new  association  with  new  constitution  and  by-laws,  membership  in 
the  old  exchange  did  not  ipso  facto  confer  membership  in  the  new  (p.  37). 
One  cannot  invoke  the  benefits  of  membership  or  incur  any  habihty 
under  the  rules  unless  he  has  consented  to  them  (p.  38).  Delay  of  one 
year  in  claiming  membership  during  (p.  40)  which  membership  became 
of  value,  was  laches.  Konta  v.  Stock  Exchange,  189  Mo.  26,  87  S.  W. 
969. 

209 


§  55]  NON-PROFIT   ASSOCIATIONS  [Chap.  V 

The  body  has  a  clear  right  to  prescribe  the  quah- 
fications  for  its  membership;  it  may  make  it  as  ex- 
clusive as  it  sees  fit;  it  may  make  the  restriction  on 
the  Une  of  citizenship,  nationality,  age,  creed  or  profes- 
sion, as  well  as  numbers.  This  power  is  incident  to  its 
character  as  a  voluntary  association  and  cannot  be  in- 
quired into  except  on  behalf  of  some  person  who  has 
acquired  rights  in  the  organization  and  to  protect  such 
rights."  ^  It  cannot  be  compelled  to  admit  as  mem- 
bers persons  whom  it  chooses  to  exclude.^  Stock  ex- 
change seats,  so-called,  which  frequently  have  a  high 
financial  value,  are  in  fact  merely  privileges  incident 
to  membership.  Under  the  rules  of  the  exchange  the 
value  of  membership  may  be  realized  by  transfer  to 
persons  approved  by  the  association  but  subject  to  the 
regulations  of  the  exchange,  which  usually  provide 
that  the  proceeds  must  first  be  applied  to  pay  obhga- 
tions  to  other  exchange  members.*  Though  to  a  cer- 
tain extent  it  is  treated  as  property  ^  it  is  only  when  the 

2  Mayer  v.  Journeymen  Stonecutters'  Ass'n,  47  N.  J.  Eq.  519,  524, 
20  Atl.  492. 

'  "  No  one  can  be  compelled  to  join  and  no  society  can  be  compelled 
to  admit  a  member  against  its  will  fairly  expressed  at  a  regular  meeting 
by  a  majority  vote."  Richardson  v.  Francestown  Union  Cong.  Soc, 
58  N.  H.  187. 

*  Hyde  v.  Woods,  94  U.  S.  523,  525,  24  L.  ed.  264.  The  claim  of 
one  who  furnished  money  to  buy  a  seat  is  subject  to  the  claims  of  the 
other  members  according  to  the  rules.  Thompson  v.  Adams,  93  Pa. 
St.  55,  66. 

The  proceeds  of  the  sale  by  the  exchange  of  the  seat  of  an  expelled 
member  belong  to  the  exchange  and  not  to  his  assignee.  Bel  ton  v. 
Hatch,  109  N.  Y.  593,  17  N.  E.  225. 

TIk!  following  case  contra  is  probably  not  now  law.  Sewell  v.  Ives, 
61  How.  Pr.  (N.  Y.)  54,  56. 

'  Membership  in  a  stock  exchange  is  property  passing  to  a  trustee 
in  bankruptcy.  Hyde  v.  Woods,  94  U..  S.  523,  24  L.  ed.  264;  Spar- 
huwk  V.  Yerkes,  142  U.  S.  1,  35  L.  ed.  915,  12  S.  Ct.  104;  Page  v.  Ed- 
munds, 1S7  U.  S.  596,  47  L.  ed.  318,  23  S.  Ct.  200;  Piatt  v.  Jones,  96 
N.  Y.  24;  re  Ketchum,  1  Fed.  S40  (C.  C.  —  N.  Y.);  Odell  ;;.  Hoyden, 
150  Fed.  731  (C.  C.  —  N.  Y.).  Though  not  available  till  claims  of  other 
members   are  satisfied    according   to   the  rules.    Re  Currie,   185  Fed. 

2i0 


Chap.  V]  ADMISSION   OF   MEMBERS  [§  55 

exchange  itself  has  acted  and  disposed  of  the  seat  that 
its  proceeds  become  available.^ 

A  somewhat  similar  situation  arises  in  the  cases  re- 
lating to  "farmers'  telephone  lines."  These  are  fre- 
quently informal  associations  in  which  membership  is 
limited  by  the  physical  capacity  of  the  service  installed. 
Hence  the  question  whether  membership  can  be  sold 
with  the  farm  is  important.  It  is  held  that  the  asso- 
ciation has  a  right  to  control  its  own  membership.^ 
One  who  attends  a  meeting  and  votes  on  a  proposition, 
cannot  thereafter  dispute  his  membership.^    A  change 

263.  It  also  passes  to  a  receiver  in  supplementary  proceedings  on  execu- 
tion against  the  owner  (incorporated  exchange).  PoweU  v.  Waldron,  89 
N.  Y.  328.  A  pledge  of  the  seat  gives  an  equitable  hen.  Nashua 
Bank  v.  Abbott,  181  Mass.  531,  63  N.  E.  1058.  It  is  subject  to  an  in- 
heritance tax  on  descent  of  "property"  or  "estate."  Re  Hellman,  174 
N.  Y.  254,  66  N.  E.  809.  A  seat  is  capital  invested  in  business.  (Per 
Vann,  J.,  in  People  v.  Feitner,  167  N.  Y.  1,  17,  60  N.  E.  265.)  Mem- 
bership in  a  board  of  trade  or  exchange  is  taxable  to  the  member  as 
property  under  a  general  property  tax  (corporation).  State  v.  McPhail, 
124  Minn.  398,  406,  145  N.  W.  108;  O'Dell  v.  Boyden,  150  Fed.  731 
(dictum).  Held:  That  the  tax  statutes  did  not  in  fact  include  it. 
Mayor  v.  Johnson,  96  Md.  737,  54  Atl.  646  ((dictum);  People  v.  Feitner, 
167  N.  Y.  1,  60  N.  E.  265  (dictum).  Held:  Not  property,  but  a  mere 
personal  privilege,  and  so  not  taxable.  San  Francisco  v.  Anderson, 
103  Cal.  69,  36  Pac.  1034.  Held:  Not  property.  Dictum  that  could 
not  be  seized  on  execution  for  debt  of  a  member.  Thompson  v.  Adams, 
93  Pa.  St.  55,  66. 

^  Pledgee  not  allowed  to  sell  seat.  Ketcham  v.  Provost,  141  N.  Y. 
S.  437,  441.  Dictum  that  court  has  no  power  to  compel  admission  of 
purchaser  of  seat  at  a  judicial  sale.  People  v.  Feitner,  167  N.  Y.  1,  7, 
60  N.  E.  265. 

^  Dispute  between  vendor  and  vendee  of  farm  as  to  whether  phone 
went  with  sale  or  not.  Plaintiff  was  voted  in  provided  he  settle  satis- 
factorily with  vendor.  Vendor  then  assigned  his  rights  to  another, 
who  connected.  Held:  Plaintiff  not  a  member  under  the  vote.  Staples 
V.  Hobbs,  145  la.  114,  120,  123  N.  W.  935.  The  company  had  a  right 
in  good  faith  to  control  its  membership  and  the  purchaser  could  not 
be  deemed  a  member  merely  by  virtue  of  his  warranty  deed.  CantriU 
Telephone  Co.  v.  Fisher,  157  la.  203,  138  N.  W.  436,  438;  Staples  v. 
Hobbs,  145  la.  114,  123  N.  W.  935.  Membership  in  an  association  is 
not  transferable.  Moore  v.  Telephone  Co.,  171  Mich.  388,  399,  137 
N.  W.  241;  Branagan  v.  Buckman,  122  N.  Y.  S.  610,  aff'd  130  N.  Y.  S. 
1106,  145  App.  Div.  950. 

8  Francis  v.  Perry,  144  N.  Y.  S.  167,  82  Misc.  271. 

211 


§  55]  NON-PROFIT   ASSOCIATIONS  [Chap.  V 

in  the  scope  of  the  membership  does  not  affect  the  iden- 
tity of  the  organization.^ 

This  question  has  come  up  in  connection  with  so- 
called  clubs  formed  to  evade  the  liquor  laws.  In  these 
the  limitations  on  membership  are  usually  nebulous. 
As  was  said  in  Commonwealth  v.  Pomphret/"  "the 
word  'club'  has  no  very  definite  meaning.  Clubs  are 
formed  for  all  sorts  of  purposes  and  there  is  no 
uniformity  in  their  constitutions  and  rules."  A  bona 
fide  club  with  limited  membership  owning  prop- 
erty in  common  may  distribute  it  to  members. 
Many  clubs  furnish  food  and  drink  to  members  for 
money.  If  the  main  purpose  of  the  club  were  to 
furnish  liquor  to  members  on  a  valuation  deter- 
mined by  the  club  and  any  person  could  become 
a  member  on  purchasing  a  ticket,  the  organization 
itself  might  show  an  intent  to  sell  liquor  to  any  one 
who  offered  to  buy.  "One  inquiry  always  is  whether 
the  organization  is  bona  fide  a  club  with  limited  mem- 
bership, into  which  admission  cannot  be  obtained  by 
any  person  at  his  pleasure  and  in  which  the  property 
is  actually  owned  in  common  with  the  mutual  rights 
and  obligations  which  belong  to  such  common  owner- 
ship under  the  constitution  and  rules  of  the  club,  or 
whether  either  the  form  of  a  club  has  been  adopted  for 
other  purposes  with  the  intention  and  understanding 
that  the  mutual  rights  and  obligations  of  the  members 

'  A  county  branch  of  a  national  organization  was  originally  com- 
posed of  delegates  fi-om  subordinate  branches,  but  by  amendment  of 
tli(!  national  constitution  inembers  of  local  bran(!h(\s  were  made  in- 
fiividually  mtsinbers  of  the  coimty  branch.  A  bill  brought  by  the  county 
1  ranch  after  the  change  to  enforce  a  trust  created  for  the  county  branch 
bcfor(!  th(!  change  was  held  good,  the  organization  being  the  same  de- 
s\)i\('.  the  change  in  mcmbershi)).  Munroc  County  Alliance  v.  Owens, 
•jr>  So.  ,S7()  (Mi.ss.). 

I"  i;{7  AIa.sH.  .004,  567. 

212 


Chap.  V]  EXPULSION  OF   MEMBERS  [§  56 

shall  not  be  such  as  the  organization  purports  to  create 
or  a  mere  nanae  has  been  assumed  without  any  real 
organization  behind  it."  ^^ 

§  56.  Expulsion  of  Members 

It  has  been  said  by  high  authority  that  courts  have 
no  jurisdiction  to  interfere  to  prevent  the  expulsion  of 
a  member  except  on  the  theory  of  protection  to  his 
property  rights.  A  man  was  expelled  from  a  labor 
union  for  apprenticing  his  son  in  a  non-union  shop. 
The  court  (Jessel,  M.R.)  said:  "The  first  question  I 
will  consider  is,  what  is  the  jurisdiction  of  a  court  of 
equity  as  regards  interfering  at  the  instance  of  a  mem- 
ber of  a  society  to  prevent  his  being  improperly  expelled 
therefrom?  I  have  no  doubt  whatever  that  the  founda- 
tion of  the  jurisdiction  is  the  right  of  property  vested 
in  the  member  of  the  society  and  of  which  he  is  un- 
justly deprived  by  such  unlawful  expulsion.  There  is 
no  such  jurisdiction  I  am  aware  of  reposed  in  this  coun- 
try, at  least  in  any  of  the  Queen's  courts,  to  decide 
upon  the  rights  of  persons  to  associate  together  when 
the  association  possesses  no  property.  .  .  .  That  is  to 
say,  courts  as  such  have  never  dreamt  of  enforcing 

11  Commonwealth  v.  Pomphret,  137  Mass.  564,  567.  A  liquor  dealer 
formed  a  partnership  association  with  regular  organization  in  the  form 
of  an  unincorporated  company.  Members  paid  $1  for  a  ticket  which 
was  in  the  form  of  a  certificate  of  membership.  When  one  got  a  drink 
the  ticket  was  punched  for  a  certain  amount  up  to  $1.  Held:  The 
whole  scheme  was  a  device  to  evade  the  law  and  defendant  was  really 
selling  the  liquor.  But  even  if  the  partnership  really  owned  the  stock 
it  would  have  more  right  to  sell  to  members  without  a  hcense  than 
defendant  would  have.  Rickart  v.  People,  79  111.  85,  90.  Ace.  State  v. 
Mercer,  32  la.  405. 

Though  the  pohce  cannot  have  access  to  a  private  clubhouse  to  in- 
terfere with  festivities  which  are  not  a  breach  of  the  peace,  when  tickets 
to  a  ball  were  sold  pubhcly  to  any  one  who  sought  one  and  liquor  sold 
indiscriminately  to  those  admitted,  this  rule  cannot  be  invoked.  Cercle 
Frangais  v.  French,  44  Hun  123. 

213 


§  56]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

agreements  strictly  personal  in  their  nature,  whether 
they  are  agreements  of  hiring  and  service,  being  the 
common  relation  of  master  and  servant,  or  whether  they 
are  agreements  for  the  purpose  of  pleasure  or  for  the 
purpose  of  scientific  pursuits  or  for  the  purpose  of 
charity  or  philanthropy  —  in  such  case  no  court  of 
justice  can  interfere  so  long  as  there  is  no  property  the 
right  to  which  is  taken  away  by  the  person  complain- 
ing." ' 

But  the  rule  is  not  quite  so  broad  as  that.  ^Miile 
it  is  true  that  there  is  inherent  power  in  an  associa- 
tion -  not   organized  for  profit  to  remove  a  member 

1  The  court,  however,  held  that  the  trade  union  benefits  were  such 
a  property  right,  but  that  the  restraint  of  trade  purposes  made  the 
union  illegal  and  the  contract  therefore  not  enforceable.  Rigby  v. 
Connol,  L.  R.  14  Ch.  Div.  482,  487.  Ace.  (on  principle  quoted  in  the 
text)  Lambert  v.  Addison,  46  L.  T.  Rep.  n.  s.  20,  24.  Bouldin  v.  Alex- 
ander, 15  Wall.  131,  138  (church);  Watson  v.  Gar^'in,  54  :^Io.  353,  378 
(dictum  church).  An  allegation  that  membership  in  a  church  is  a 
valuable  right  is  insufficient.  State  v.  Cummins,  171  Ind.  112,  85  N. 
E.  359.  The  office  and  salary  of  lay  delegate  of  a  chiuch  which  wiU 
be  lost  on  expulsion  is  not  such  a  property  right.  Hatfield  v.  DeLong, 
156  Ind.  207,  210,  59  N.  E.  493.  Expulsion  from  a  church  without 
notice.  Lurton,  J.,  refused  to  inquire  into  it.  Xance  v.  Busby,  91 
Tenn.  .303,  323,  325,  18  S.  W.  874. 

So  long  as  there  is  no  infringement  of  the  rights  of  a  citizen  and  no 
conflict  with  the  jurisdiction  of  the  State,  church  associations  should 
be  free  from  the  interference  of  courts  where  there  is  drav^Ti  in  question 
only  the  right  of  such  organizations  to  tr>'  and,  if  need  be,  expel  its 
members  for  the  violation  of  a  church  ordinance  or  law.  Pounder  v. 
Ashe,  44  Neb.  672,  63  N.  W.  48,  overruling  36  Neb.  564,  54  N.  W. 
847. 

"\Mien  membership  in  a  rehgious  corporation  depends  on  mem- 
bership in  the  congregation  or  religious  association  the  courts  in  order 
to  determine  the  right  to  be  a  member  of  the  corporation  must  deter- 
mine on  membership  in  the  congregation;  and  it  must  do  this  by  the 
rules  which  the  congregation  has  adopted  for  its  membership.  If  the 
rules  make  adherence  to  particular  doctrines  a  condition  of  member- 
ship, the  rejection  of  those  doctrines  ought  to  determine  a  member's 
right  to  remain  in  the  congregation,  or  if  it  does  not,  ipso  facto,  operate 
to  exclude  him,  it  would  certainly  be  good  reason  for  his  expulsion." 
Trustees  v.  Hcrischell,  48  Minn.  494,  495,  51  N.  W.  477. 

'  MrKano  v.  Adams,  123  N.  Y.  609,  613,  25  N.  E.  1057  (pohtical 
committee  local  organization  disbanded  by  the  general  body);  Cheney 

214 


Chap.  V]  EXPULSION  OF   MEMBERS  [§  56 

for  cause  where  no  property  rights  are  involved,  the 
method  of  expulsion  adopted  must  not  be  arbitrary,^ 
must  conform  to  any  rules  previously  ^  adopted  by  the 
association  applicable  to  expulsion  and  must  conform 
to  the  elementary  conception  of  judicial  fairness.  ''No 
proceeding  in  the  nature  of  a  judicial  proceeding  can 
be  valid  unless  the  party  charged  is  told  that  he  is  so 
charged,  is  called  on  to  answer  the  charge  and  is 
warned  of  the  consequences  of  refusing  to  do  so."  ^ 
The  court  will  not  inquire  into  the  reasonableness  of  the 
ground  for  expulsion.  ''All  a  court  can  consider,"  said 
Brett,  L.J.,  "is  whether  anything  has  been  done  con- 
trary to  natural  justice,  though  within  the  rules  of  the 
club;  whether  action  of  the  club  was  according  to  its 
rules,  and  whether  the  decision  of  the  club  is  bona  fide."  ^ 

V.  Ketcham,  5  Ohio  Nisi  Prius  Rep.  139,  141;  Crow  v.  Capital  City,  26 
Pa.  Sup.  Ct.  411,  422  (beneficial  order);  Manning  v.  San  Antonio 
Club,  63  Tex.  166,  170.  Contra,  unless  the  charter  expressly  so  pro- 
vides, Evans  v.  Philadelphia  Club,  50  Pa.  St.  107.  Jessel,  M.R.,  in 
Dawkins  v.  Antrobus,  L.  R.  17  Ch.  D.  615,  620,  said  obiter  that  a  club 
has  no  inherent  power  to  expel.  The  point  was  not  considered  on 
appeal. 

*  Burke  v.  Roper,  79  Ala.  138,  144  (church  society) ;  Hanley  v.  Elm 
Grove  Co.,  150  la.  198,  129  N.  W.  807  (farmers'  telephone  line  — 
dictum). 

*  Where  the  original  rules  provided  for  amendment,  it  was  held  that 
a  social  club  had  the  right  to  alter  the  rules  so  as  to  expel  a  member. 
Dawkins  v.  Antrobus,  L.  R.  17  Ch.  D.  615,  634,  44  L.  T.  Rep.  n.  s.  557, 
29  Weekly  Rep.  511;  Dawson  v.  HeweU,  118  Cal.  613,  621,  50  Pac.  763, 
49  L.  R.  A.  400. 

6  Lord  Denman  in  Innes  v.  WyUe,  1  C.  &  K.  257,  47  E.  C.  L.  255,  262 
(plaintiff  had  used  menacing  language  towards  another  member.  This 
was  said  to  be  misconduct  justifying  expulsion).  Ace.  Grassi  v. 
O'Rourke,  153  N.  Y.  S.  493,  498  (employers'  ass'n). 

6  Dawkins  v.  Antrobus,  17  Ch.  D.  615,  631,  44  L.  T.  Rep.  n.  s.  557, 
29  Weekly  Rep.  511  (social  club);  Baird  v.  Wells,  L.  R.  44  Ch.  D.  661, 
670;  Lyttleton  v.  Blackburne,  45  L.  J.  Ch.  219,  222;  Lambert  v.  Addi- 
son, 46  L.  T.  R.  N.  s.  20.  In  one  case  it  was  said  that  where  there  were  by- 
laws, not  unreasonable,  they  must  be  followed;  where  none,  the  court 
will  inquire  only  whether  he  had  reasonable  notice,  fair  opportunity 
of  presenting  his  defense  in  accordance  with  general  principles  of  law  and 
justice.  Mutual  aid  society.  Von  Arx  v.  San  Francisco  Verein,  113  Cal. 
377,  45  Pac.  685.    "Only  in  case  of  gross  injustice  wiU  the  court  inter- 

215 


§  56]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

Beyond  these  limits  the  courts  will  not  inquire  collat- 
erally into  the  merits  of  the  expulsion.^  Though  it  has 
been  said  by  respectable  authority  that  there  is  a  differ- 
ence between  incorporated  and  unincorporated  clubs  in 
this  regard,^  the  rules  stated  for  the  former  seem  to  be 

fere."  Engel  v.  Walsh,  258  111.  98,  104,  101  N.  E.  222.  A  member  ex- 
pelled and  fined  for  voting  contraiy  to  the  wishes  of  the  union  was  re- 
instated.   Schneider  v.  Local  Union,  116  La.  270,  40  So.  700. 

7  Lamson  v.  Hewell,  118  Cal.  613,  50  Pac.  763,  49  L.  R.  A.  400  (Ma- 
sonic lodge);  Underwriters  v.  Johnson,  119  S.  W.  153  (Ky.)  (expulsion 
of  insurance  agent  from  board  of  underwTiters.  The  board  had  maps  and 
other  property  useful  in  insurance  business  and  the  prestige  of  belong- 
ing to  it  was  valuable);  Pitcher  v.  Board  of  Trade,  121  111.  412,  421, 
(expulsion  from  a  board  of  trade  depriving  plaintiff  of  opportunity  to  do 
a  profitable  business.  He  is  bound  by  the  contract  he  made  in  joining); 
Osceola  Tribe  v.  Schmidt,  57  Md.  98,  104  (expulsion  from  a  benefit  soci- 
ety depriving  plaintiff  of  benefits);  Farmer  v.  Kansas  City  Board  of 
Trade,  78  Mo.  App.  557  (board  of  trade);  Sherry's  Appeal,  116  Pa.  St. 
391,  397,  9  Atl.  478  (fraternal  beneficial  society);  Leech  v.  Harris,  2 
Brewst.  571,  576  (Pa.)  (stock  exchange). 

A  Republican  ward  committee  voted  to  expel  certain  members  who 
refused  to  sign  a  statement  that  they  supported  the  fuU  RepubUcan 
ticket  at  a  recent  election.  They  filed  a  biU  in  equity  to  restrain  de- 
fendants from  hindering  them  in  performance  of  duties  as  members  of 
committee.  Held:  Bill  dismissed.  Smith  v.  HoUis,  33  Wkly.  Notes 
Cas.  (Pa.)  485. 

Expulsion  of  an  entire  subordinate  lodge  by  a  supreme  lodge  was  not 
authorized  by  the  by-laws.  Holomany  v.  National  Slavonic  Soc,  57 
N.  Y.  S.  720,  39  App.  Div.  573. 

Member  of  an  association  filed  a  mechanic's  lien  against  the  property 
of  another  member.  He  was  expelled  for  not  first  submitting  the  dispute 
to  arbitration.  Held :  Courts  by  law  do  not  require  submission  to  arbi- 
tration. Hence  expulsion  invalid.  Peremptory  mandamus  issued.  Mil- 
ler V.  New  York  Builders'  League,  53  N.  Y.  S.  1016,  29  App.  Div. 
630. 

*  Commonwealth  v.  Union  Leagiie  of  Philadelphia,  135  Pa.  St.  301, 
321,  327,  19  Atl.  1030,  20  Am.  St.  Rep.  870,  8  L.  R.  A.  195.  Stock  ex- 
change. Since  it  is  not  incorporated,  the  cases  which  have  restored  a 
member  who  had  been  obstructed  in  the  exercise  of  his  franchise  do  not 
apply  "to  a  voluntary  unincorporated  body  which  comes  into  existence 
by  a  mutual  agreement  of  the  ])ersons  forming  it  and  is  thereafter 
carried  on  under  rules  which  the  body  adopts  for  its  government.  A 
member  of  a  corj^)oration  enjoys  a  franchise,  the  right  to  whicli  is  not 
derived  from  the  cor])oration,  l)ut  is  (treated  by  statute  or  exists  by 
prcjscription,  and  tlu^reforc!  (lannot  l)e  taken  away  by  act  of  the  corpora- 
tion, unl(!.s.s  th(!  i)ow(!r  is  giv(!n  in  the  charter  or  the  member  has  been 
guilty  of  a  vs\un%  the  conviction  of  which  would  work  a  forfeiture  of  all 
(;ivil  rightH,  including  the  corporation  franchise,  or  has  conuuitted  acts 

216 


Chap.  V]  EXPULSION   OF   MEMBERS  [§  56 

identical  with  those  laid  down  for  associations  in  the 
decisions  above  cited. 

What  is  meant  by  saying  that  the  proceedings  must 
conform  to  natural  justice  seems  to  be  merely  that 
there  must  be  a  hearing  conducted  in  good  faith  of 
which  the  accused  has  notice  and  at  which  he  has  an 
opportunity  to  be  heard,  ^  and  that  any  other  special 
rules  of  the  association  applicable  to  the  case  shall  be 
strictly  complied  with.^*^     Hearings  need  not  be  con- 

which  tend  to  the  dissolution  of  the  corpoi'ation,  such  as  the  defacing 
of  its  charter,  the  obliteration  or  alteration  of  its  records  and  other  acts 
tending  to  impair  or  destroy  its  title  to  those  rights  and  privileges;  in 
which  case  the  expulsion  of  the  member  is  but  the  exercise  of  the  power 
incident  to  the  right  of  self-preservation.  In  an  unincorporated  associ- 
ation membership  is  conferred  by  the  organization  itself,  and  the  law 
cannot  compel  it  to  admit  a  member  nor  to  restore  one  who  has  been 
expelled  for  not  complying  with  the  conditions  upon  which  he  was  made 
a  member.    Wliite  v.  BrowneU,  2  Daly  329,  357  (N.  Y.). 

Member  of  an  association  filed  a  mechanic's  lien  against  the  prop- 
erty of  another  member.  He  was  expelled  for  not  fii'st  submitting  the 
dispute  to  arbitration.  Held :  Constitution  and  by-laws  do  not  require 
a  submission  to  arbitration.  Hence  expulsion  in vaUd.  Peremptory  man- 
damus issued.  Miller  v.  New  York  Builders'  League,  53  N.  Y.  S.  1016, 
29  App.  Div.  630. 

9  Labouchere  v.  Earl  of  WlmrncIiiTe,  L.  R.  13  Ch.  D.  346,  350,  352 
(social  club);  Durel  v.  Perseverance  Fire  Co.,  47  La.  Ann.  1101,  17  So. 
591  (fire  company);  Watson  v.  Garvin,  54  Mo.  353,  381  (church); 
Jones  V.  State,  28  Neb.  495,  498,  44  N.  -W.  658  (rehgious  society) ;  Lewis 
;;.  Wilson,  121  N.  Y.  284,  288,  24  N.  E.  474,  30  N.  Y.  St.  987  (stock  ex- 
change. Had  notice  but  did  not  attend  hearing) ;  People  v.  Manhattan 
Chess  Club,  52  N.  Y.  S.  726  (social  club.  Opening  sealed  letter  ad- 
dressed to  another);  "And  a  proper  finding  and  judgment  has  been 
entered  on  the  facts,"  Crow  v.  Capital  City,  26  Pa.  Sup.  Ct.  411,  424 
(beneficial  order);  Cotton  Ass'n  v.  Taylor,  23  Tex.  Civ.  App.  367,  56 
S.  W.  553  (labor  union);  Guinane  v.  Sunnyside  Boating  Co.,  21  Ont. 
App.  49  (instead  of  attending,  he  wTote  for  particulars). 

Dictum  that  hearing  is  unnecessary  when  there  is  no  denial  of  facts 
that  justify  expulsion.  Munroe  v.  Colored  Ass'n,  135  La.  894,  66 
So.  260. 

i«  Dingwall  v.  Assoc,  4  Cal.  App.  565,  569,  88  Pac.  597;  Rabb  v. 
Trevelyan,  122  La.  174,  47  So.  455;  Harris  v.  Aiken,  76  Kan.  516,  520, 
92  Pac.  537  (live  stock  exchange);  Kopp  v.  White,  65  N.  Y.  S.  1017, 
1019  (Masonic  lodge). 

Where  the  appellate  body  of  a  Chamber  of  Commerce  in  overruling 
a  decision  of  its  arbitrators  as  to  the  making  of  a  contract,  ignored  cer- 
tain of  its  own  rules  regarding  the  agency  of  clerks,  it  was  held  that  this 

217 


§  56]  XOX-PROFIT   ASSOCIATIONS  [Chap.  V 

ducted  according  to  the  strict  rules  of  evidence  or  pro- 
cedure of  law  courts. ^^  Where  no  rule  of  the  club  pro- 
\4des  for  notice  the  association  or  its  proper  officers 
may  decide  how  notice  shall  be  given  in  an}-  particular 

error  was  jurisdictional  and  the  chamber  was  enjoined  against  expelling 
the  plaintiff.  Bartlett  i-.  Bartlett,  etc.  Co.,  116  Wis.  450,  467,  93  X.  W. 
473. 

Injimction  granted  against  trial  by  a  judicatory'  not  constituted  ac- 
cording to  the  law  of  a  church.  "As  an  unlawful  expulsion  would  affect 
appellant's  standing  in  the  community  and  accomplish  an  injun'  for 
which  there  is  no  adequate  remedy  at  law."  Hatfield  v.  DeLong,  156 
Ind.  207,  211,  59  X.  E.  483. 

'^Tien  officers  and  members  of  one  association  which  does  not  forbid 
its  members  to  join  another,  join  another  association  whose  by-laws 
forbid  its  members  to  belong  to  another  association,  they  do  not  forfeit 
membership  or  vacate  offices  in  the  first  association.  Wamebold  v. 
Grand  Lodge,  83  la.  23,  48  X.  W.  1069.     See  §  59,  note  3. 

11  Derrv-  v.  G.  H.  L.  M.  M.  135  Mich.  494,  98  X.  W.  23.  May  dele- 
gate to  a  committee  the  taking  of  testimony  and  making  a  report  on  it, 
though  expulsion  is  to  be  the  act  of  the  society  and  not  of  the  committee. 
State  V.  Medical  Soc,  91  Mo.  App.  76,  S3.  ' 

The  fact  that  some  of  the  board  in  pursuance  of  their  duties  started 
the  investigation  did  not  prevent  their  sitting  in  judgment.  Association 
may  delegate  power  to  expel  to  a  committee,  making  such  action  final. 
Harris  v.  Aiken,  76  Kan.  516,  92  Pac.  537  (five  stock  exchange).  Not 
bound  to  confine  itself  to  legal  e\'idence.  Guinane  v.  Sunnyside  Boat- 
ing Co.,  21  Ont.  App.  49. 

XMien  the  determination  of  a  question  is  committed  to  a  board  or 
committee  of  definite  members  who  act  by  delegated  powers  under  a 
provision  that  their  act  shall  be  by  a  majority  or  two-thirds,  this  means 
a  majority  or  two-thirds  of  all  the  members.  When  to  a  bodj'  of  unde- 
fined numbers  wTio  act  by  original  not  delegated  powers,  it  means  a 
majority  or  two-thirds  of  those  who  take  part.  Ivrause  v.  Sander,  122 
N.  Y.  S.  54,  57,  66  Misc.  601. 

Under  a  by-law  providing  that  the  accused  is  entitled  to  present  his 
case,  he  is  entitled  to  be  confronted  with  all  witnesses  against  him  and 
hear  their  testimony.    Raych  v.  Hadida,  130  X.  Y.  S.  346. 

Action  by  Shakers  expelled  from  the  society  for  their  disbelief.  There 
was  an  informal  hearing  by  the  proper  judicial  body  at  which  plaintiffs 
were  heard,  but  no  fonnal  written  charges  (counsel  argued  it  was  a 
corporation) .  Held :  Plaintiffs  cannot  recover  on  contract  for  past  serv- 
ices to  the  society  because  by  the  constitution  which  they  signed  this 
was  expressly  renounced,  nor  for  support  since  exjjulsion  because  the 
constitution  bound  the  society  to  support  members  only  so  long  as  they 
confonno<l  to  the  jirinciples  of  the  society.  They  cannot  recover  in  tort 
for  ex])uLsi(jn  because  the  proi)er  authority  of  the  society  has  decided 
they  do  not  conform.  By  the  constitution  they  were  made  the  sole 
judges.  Grosvcnor  v.  United  Society  of  BeUevers,  118  Mass.  78, 
80. 

218 


Chap.  V]  EXPULSION   OF   MEMBERS  [§  56 

instance. ^^  By  appearing  at  the  hearing  the  mem- 
ber expelled  waives  any  informality  in  the  notice. ^^ 
Courts  do  not  interfere  with  the  decisions  of  such  socie- 
ties except  to  see  that  they  have  acted  according  to 
their  rules,  in  good  faith  and  not  in  violation  of  the  law 
of  the  land.^^  By  joining  the  association  the  member 
voluntarily  submits  himself  to  its  rules. ^^     The  con- 

12  Labouchere  v.  Earl  of  WharncUffe,  L.  R.  13  Ch.  D.  346,  352.  Con- 
tra. Must  be  personal  service  as  at  common  law.  Wachtel  v.  Noah 
Widows',  etc.  Soc,  84  N.  Y.  28,  31. 

When  a  society  holds  its  meetings  on  Sunday,  it  may  serve  notice  on 
Sunday  on  plaintiff  of  hearing  set  for  next  Sunday  to  try  him  on  charges 
on  which  he  was  expelled.  The  Sunday  law  does  not  apply.  People  v. 
Young  Men's,  etc.  Soc,  65  Barb.  357  (N.  Y.). 

13  Harris  v.  Aiken,  76  Kan.  516,  520,  92  Pac.  537  (live  stock  ex- 
change) ;  Brennan  v.  United  Hatters,  73  N.  J.  L.  729,  65  Atl.  165  (trade 
union.  Question  for  jury) ;  Wilhamson  v.  Randolph,  96  N.  Y.  S.  644,  48 
Misc.  96,  104  (stock  exchange);  People  v.  Coachman's  Union  Benev. 
Soc,  24  N.  Y.  S.  114,  4  Misc.  424,  53  N.  Y.  St.  560.  But  offering  at  a 
meeting  to  answer  charges  is  not  a  waiver  of  the  right  to  question  the 
legality  of  the  resolution  ordering  trial.  Weiss  v.  Musical  Union,  189 
Pa.  St.  446,  42  Atl.  118. 

A  member  of  an  association  expelled  waived  right  to  object  to  con- 
stitution of  board  appointed  to  try  him  by  saying  he  had  no  objection 
before  they  started  in.  The  vote  to  expel  was  irregular  but  was  covered 
by  a  proper  vote  after  the  application  for  mandamus,  but  before  trial. 
Held:  Mandamus  should  not  issue.  P.  v.  N.  Y.,  84  N.  Y.  S.  766,  87 
App.  Div.  478,  aff'd  178  N.  Y.  576,  70  N.  E.  1105.  Munroe  v.  Colored 
Ass'n,  135  La.  894,  66  So.  260. 

14  Connolly  v.  Masonic  Mut.  Ben.  Ass'n,  58  Conn.  552,  20  Atl.  671, 
18  Am.  St.  Rep.  296,  '9  L.  R.  A.  428  (benefit  society.  Reinstatement 
by  district  deputy  after  expulsion) ;  Mulroy  v.  Supreme  Lodge,  28  Mo. 
App.  463,  469  (benefit  society). 

"  Its  findings  of  fact  will  be  upset  only  if  no  honest  mind  could  reach 
that  conclusion  on  the  evidence."  Williamson  v.  Randolph,  96  N.  Y.  S. 
644,  48  Misc.  96,  104  (stock  exchange). 

"Conclusive  upon  all  questions,  including  sanity  at  the  time  of  giv- 
ing offense  and  the  trial  therefor."  Dodd  v.  Armstrong,  18  Phila.  399 
(Pa.)  43  Leg.  Int.  270. 

Court  must  presmue  that  a  trial  with  a  view  to  expulsion  by  court  of 
Grand  Lodge  will  be  according  to  natural  right  and  the  rules  of  the  order 
and  wiU  not  enjoin  it  in  advance.  Hershiser  v.  WiUiams,  6  Ohio  Cir.  Ct. 
147,  149,  4  Ohio  Dec.  17,  11  Ohio  Dec.  (reprint)  76,  24  Cine.  L.  Bui.  314. 

15  Frankhn  v.  Burnham,  82  N.  Y.  S.  882,  40  Misc.  566  (Masonic  trial 
prior  to  criminal  trial.  Injunction  refused);  Crow  v.  Capital  City, 
26  Pa.  Sup.  Ct.  411,  424  (beneficial  society). 

Member  of  stock  exchange  cannot  ask  reinstatement  on  the  theory 

219 


§  56]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

stitution  and  by-laws  are  a  contract  with  the  members. ^^ 
Hence  if  his  contract  of  membership  involves  illegal 
provisions,  he  cannot  enforce  it  by  seeking  reinstate- 
ment after  expulsion. ^^ 

When  a  member  has  been  deprived  of  property  rights 
the  courts  have  been  quicker  to  protect  him  ^^  and  have 
inquired  into  the  reasonableness  and  propriety  of  his 
expulsion, ^^  though  they  have  not   always  expressed 

that  the  contract  for  which  he  was  expeUed  was  a  gambling  contract. 
Lewis  V.  Wilson,  121  N.  Y.  284,  288,  24  N.  E.  474,  30  N.  Y.  St. 
987. 

If  a  penalty  of  expulsion  for  work  on  non-union  material  is  a  legal 
purpose  for  a  labor  union,  a  member  can  be  expelled  for  failure  to  abide 
by  it.  Bossert  v.  United  Brotherhood,  137  N.  Y.  S.  321,  324,  77  Misc. 
592. 

By-laws  of  club  provide  means  for  expulsion.  Held:  Every  member 
has  contracted  to  be  bound  by  it.  Wood  v.  Wood,  L.  R.  9  Ex.  190; 
While  V.  Damon,  7  Ves.  35. 

"  Dingwell  v.  Assoc,  4  Cal.  App.  565,  569,  88  Pac.  597;  Krause  v. 
Sander,  122  N.  Y.  S.  54,  57,  66  Misc.  601  (trade  union). 

1^  Greer  v.  StoUer,  77  Fed.  1  (C.  C.  —  Mo.)  (member  of  hve  stock  ex- 
change); FroeUch  v.  Benefit  Ass'n,  93  Mo.  App.  383,  391  (trade  union, 
called  combination  in  restraint  of  trade). 

18  Hanley  v.  Tel.  Co.,  150  la.  198,  129  N.  W.  807,  808  (farmers'  tele- 
phone line  —  dictum);  FroeUch  v.  Benefit  Ass'n,  93  Mo.  App.  383,  389 
(trade  union.     Death  benefit). 

19  Clery  v.  Browm,  51  How.  Pr.  (N.  Y.)  92,  96  (member  of  a  benefit 
society  expelled  for  violating  its  rules);  Froehch  v.  Benefit  Ass'n,  93 
Mo.  App.  383,  389. 

Member  of  a  benefit  order  claimed  sick  benefit  and  was  expelled  for 
bringing  suit  before  submitting  it  to  arbitrators  according  to  by-laws. 
Held:  "We  consider  that  any  by-law  which  provides  for  the  expulsion 
of  a  man  from  a  society  in  which  he  has  vested  property  interests  is  a 
violation  of  the  constitution  of  the  Commonwealth."  Sweeney  v.  Hugh 
McLaughlin  Soc,  14  Weekly  Notes  Cas.  466,  468  (Pa.). 

The  New  York  baseball  club  was  excluded  from  the  national  asso- 
ciation without  a  hearing,  as  required  by  its  constitution.  Bill  for  in- 
junction. Held:  Memljcrship  is  property  right  of  which  it  cannot  be 
deprived  without  having  done  som(^  act  that  is  ground  for  forfeiture  and 
notice  and  trial.  "It  is  said  that  the  association  jjossesses  no  property 
it.self.  While  it  may  have  very  littk;  proi)erty  itself,  it  is  evident  it  has 
Hoinc  proyxTty.  It  ])ays  its  president  a  salary  of  $1800  a  year."  The 
j)rivilcgc  of  phiyirig  against  the  other  clubs  is  very  profitable.  "These 
are  certainly  riglits  of  proyx-rly  which  are  entitled  to  the  j)rotection of 
the  law."  Could  not  be  exjx'llcd  wit  hout  notice  or  trial,  so  do  not  have 
to  pa.s.s  on  projjriety  of  grounds  of  forfeiture.    Metropolitan  Base  Ball 

220 


Chap.  V]  EXPULSION   OF   MEMBERS  [§  5G 

clearly  this  distinction  as  a  ground  for  their  decisions. 
In  a  leading  case  the  court  said  that  the  inherent  right 
of  expulsion  could  be  exercised  only  for  violation  of 
established  rules  assented  to  by  the  members  which 
provided  expulsion  as  a  penalty  for  such  violation  or 
for  "such  conduct  as  clearly  violates  the  fundamental 
objects  of  the  association  and  if  persisted  in  and  allowed 
would  thwart  those  objects  or  bring  the  association 
into  disrepute."^''  An  unauthorized  expulsion  is  not 
validated  by  a  by-law  adopted  for  that  purpose  after 
the  expulsion.-^ 

Members  have  been  ordered  reinstated  by  courts 
because  the  notice  to  the  plaintiff  was  held  to  have 
been  insufficient,^^  because  he  had  been  expelled  with- 
out trial  and  an  opportunity  to  defend  upon  specific 

Ass'n  V.  Simmons,  17  Wkly.  Notes  Cas.  (Pa.)  153,  155,  17  Phila.  (Pa.) 
419,  42  Leg.  Int.  (Pa.)  520,  1  Pa.  Co.  Ct.  134. 

Courts  interfere  only  (1)  if  decision  is  contrary  to  natural  justice. 
(2)  Rules  of  the  club  are  not  observed.  (3)  Action  is  malicious  and  not 
bona  fide.  Here  a  member  of  a  labor  union  entitled  to  benefits  was  ex- 
pelled for  not  joining  in  a  strike.  The  penalty  of  the  by-laws  was  a  fine. 
Later,  on  a  strike  settlement  conditioned  on  his  discharge,  reinstated 
him  and  immediately  expelled  him  for  conspiracy  to  injure  the  asso- 
ciation. Held:  Not  ftona ^c?e  and  mandamus  issued.  Otto  w.  San  Fran- 
cisco, etc.  Union,  75  Cal.  308,  17  Pac.  217,  7  Am.  St.  Rep.  156. 

Member  of  a  labor  union  expelled  for  non-payment  of  an  unauthor- 
ized fine  was  restored.  Meurer  v.  Detroit  Musicians,  etc.  Ass'n,  95 
Mich.  451,  54  N.  W.  954. 

Member  of  a  fu'e  company  expelled  for  non-payment  of  dues  in- 
creased after  the  association  had  hquidated  its  assets  was  held  invalid 
because  the  new  by-law  seemed  unreasonable.  Plaintiff  held  entitled 
to  share  in  the  property.  Engine  Co.  v.  C,  93  Pa.  264,  270.  One  mem- 
ber of  a  lodge  threatened  to  kill  another.  Members  expelled  him.  Held : 
Not  unlawful  conspiracy,  as  they  had  grounds  for  expulsion.  Moon  v. 
Flack,  74  N.  H.  140,  65  Atl.  829. 

20  Otto  V.  San  Francisco,  etc.  Union,  75  Cal.  308,  314,  17  Pac. 
217. 

21  Pirics  V.  First  Russian  Soc,  83  N.  J.  Eq.  29,  89  Atl.  1036  (benefit 
society) . 

22  Fritz  V.  Muck,  62  How.  Pr.  69  (N.  Y.)  (benefit  society);  Fisher  v. 
Keane,  L.  R.  11  Ch.  D.  353,  362  (club);  State  v.  Baseball  Ass'n,  61 
Wash.  79,  82,  111  Pac.  1055  (no  notice  in  notice  of  special  meeting, 
though  the  member  attended). 

221 


§  56]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

charges,^^  because  the  by-laws  of  the  association  had 
not  been  comphed  with  -^  or  because  the  charges  were 
not  made  in  good  faith. -^  Where  the  rules  imposed 
only  a  fine,  a  forfeiture  could  not  be  decreed  also.^^ 

Some  courts  hold  that  a  petition  for  mandamus  is  the 
correct  procedure  to  obtain  restoration  to  member- 
ship." The  wTit  of  mandamus  was  originally  a  pre- 
rogative WTit  directed  to  a  public  official.  In  this 
country  it  has  ceased  to  be  a  prerogative  writ  and  its 
use  has  been  extended  from  cases  involving  the  duties 
of  public  officials  to  those  of  officers  of  private  cor- 
porations.    Since  corporations  derive  their  existence 

23  BjTne  V.  B.  U.,  74  N.  J.  L.  258,  65  Atl.  839.  "The  legal  principle 
is  a  general  one,  affecting  aU  proceedings  which  may  result  in  loss  of 
property,  position  or  character,  or  any  disaster  to  another,  that  he  shall 
first  be  heard  by  the  board  or  tribunal  considering  his  case  before  that 
body  will  be  legally  permitted  to  pronounce  his  condemnation."  Lou- 
bat  V.  Le  Roy,  40  Him  546,  551. 

2^  Savannah  Cotton  Exchange  v.  State,  54  Ga.  668,  670  (appeal  lim- 
ited to  jurisdiction  of  arbitration  committee  refused);  Loubat  v.  Le 
Roy,  40  Hun  546,  551  (a  vote  requiring  two-thirds  vote  of  governing 
committee  meant  two-thirds  of  whole,  not  two-thirds  of  quorum); 
Manning  v.  Klaus,  1  Pa.  Super.  Ct.  210  (the  committee  that  heard  him 
practically  acquitted  him,  but  the  vote  of  the  master  barbers'  associa- 
tion expelled  him.  Also,  acts  ta  performance  of  a  duty  do  not  justify 
expulsion  under  a  by-law  providing  it  for  conduct  tending  to  the  injury 
of  fellow  members.  Sunday  closing);  Baird  v.  Wells,  L.  R.  44  Ch.  D. 
661,  670  (committee  acquitted,  then,  after  a  resolution  of  the  club,  re- 
versed its  action);  Mesisco  v.  Giuliano,  190  ]\Iass.  352,  354,  76  N.  E. 
907  (the  language  of  the  court  would  seem  to  hmit  it  to  cases  where 
property  rights  are  violated.    Benefit  society). 

A  leader  of  an  orchestra  was  fined  by  musicians'  union  for  cutting 
prices  contrary  to  by-laws.  It  appeared  that  the  fine  imposed  was 
under  a  set  of  by-laws  then  re])ealcd  by  the  adoption  of  a  new  and  com- 
prehensive code,  though  no  formal  repeal  of  old  set  was  voted.  Held: 
This  affected  the  jurisdiction  of  the  order  and  can  be  collaterally  at- 
tacked in  this  proceeding.  Injunction  to  restore  him  to  order  will 
is.sue.  Bachman  v.  Harrington,  102  N.  Y.  S.  406,  411,  52  Misc. 
26. 

^^  Von  Arx  v.  San  Francisco  Vcrein,  113  Cal.  377,  45  Pac.  685. 

2«  Wuchtel  V.  Noah  Widows',  etc.  Soc,  84  N.  Y.  28. 

^'  Von  Arx  v.  San  Francisco  Vennn,  113  Cal.  377,  45  Pac.  685 
(mutual  aid  society);  Savannah  Cotton  Exchange  v.  State,  54  Ga.  668, 
670  (exchange). 

222 


Chap.  V]  EXPULSION   OF   MEMBERS  [§  56 

from  the  State,  this  extension  does  not  justify  a  further 
extension  of  the  writ  to  cases  involving  the  duties  of 
officers  of  unincorporated  associations  the  existence  of 
which  depends  solely  upon  contract.  It  seems  well 
settled  that  it  is  not  available  in  cases  involving  rights 
arising  merely  out  of  private  contracts.  The  better 
rule,  therefore,  is  that  mandamus  is  appropriate  only 
when  addressed  to  officers  of  corporations  ^^  and  public 
officials,  and  that  a  bill  in  equity  for  an  injunction  is 
the  proper  practice  in  cases  of  unincorporated  associa- 
tions.^^ It  has  been  held  that  where  no  property  rights 
are  involved  an  injunction  will  not  issue  but  the  plain- 
tiff will  be  left  to  his  remedy  in  damages.^"  It  has  also 
been  said  that  mandamus  will  be  refused  in  the  dis- 
cretion of  the  court  when  it  is  obvious  that  an  irregular 
expulsion  will  immediately  be  corrected  by  a  proper 
proceeding.^^  When  properly  expelled,  a  member  of  a 
Masonic  lodge  could  not  recover  dues  paid  where  no 
fraud  had  been  practised  on  him.^-  To  include  a 
claim  for  sick  benefits  was  held  multifarious.^^    For  an 

28  State  V.  Cummins,  171  Ind.  112,  85  N.  E.  359  (church);  Burt  v. 
Grand  Lodge,  66  Mich.  85,  87,  33  N.  W.  13  (Masonic  lodge);  Doyle  v. 
Bm-ke,  29  R.  I.  123,  126,  69  Atl.  362;  Mesisco  v.  Giuhano,  190  Mass. 
352,  76  N.  E.  907  (benefit  society).  See  query  in  Hickey  v.  Baine,  195 
Mass.  440,  452,  81  N.  E.  201. 

29  Mesisco  V.  GiuHano,  190  Mass.  352,  76  N.  E.  907  (benefit  society); 
Fritz  V.  Muck,  62  How.  Pr.  69  (N.  Y.)  (benefit  society);  Fisher  v. 
Keane,  L.  R.  11  Ch.  D.  353,  362  (club);  Pirics  v.  First  Russian 
Soc,  83  N.  J.  Eq.  29,  89  Atl.  1036  (but  because  it  would  be  in- 
equitable to  force  the  reunion  of  warring  factions  after  an  illegal 
expulsion,  the  decree  was  for  distribution  of  part  of  fund  and  not 
reinstatement) . 

^0  Rowe  V.  Hewitt,  12  Ont.  L.  R.  13  (professional  hockey  club); 
Baird  v.  WeUs,  L.  R.  44  Ch.  D.  661,  670  (social  club).  "Where  the 
question  presented  does  not  involve  tangible  and  valuable  corporate 
privileges  we  cannot  interfere  in  this  way."  Burt  v.  Grand  Lodge,  66 
Mich.  85,  87,  33  N.  W.  13. 

*i  State  V.  Baseball  Ass'n,  61  Wash.  79,  82,  111  Pac.  1055. 

32  Robinson  v.  Yates,  86  111.  598. 

33  Mesisco  V.  Giuhano,  190  Mass.  352,  354,  76  N.  E.  907. 

223 


5  57]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

unlawful  expulsion  the  member  expelled  may  sue  those 
who  expelled  him  and  recover  damages.^^  "The  loss 
sustained  by  the  plaintiff  in  being  deprived  of  the  use 
and  enjojTnent  of  the  property  of  the  society  and  the 
pri^-ileges  of  membership  were  proper  elements  of  dam- 
ages, as  was  also  the  mental  suffering  of  the  plaintiff, 
caused  by  his  wrongful  expulsion  and  the  manner  in 
which  it  was  effected."  ^^  A  decision  of  reinstatement 
in  a  benefit  society  is  not  res  judicata  of  unlawful  expul- 
sion ia  an  action  for  damages  therefor.^^ 

§  57.  Exhaustion  of  Remedies  within  the  Association 

The  reluctance  of  courts  to  interfere  in  the  affairs  of 
unincorporated  associations  is  shown  by  their  rule  that 
before  a  member  apphes  to  a  court  for  rehef  he  must 
have  exhausted  his  remedies  within  the  association.^ 

^  Schneider  v.  Local  Union,  116  La.  270,  40  So.  700  (trade  union); 
ConneU  v.  Stalker,  48  N.  Y.  S.  77,  21  Misc.  609. 

Member  of  a  trade  union  may  have  an  action  against  his  feUow  mem- 
bers for  conspiracy  to  expel  him  unlawful!}'.  Campbell  v.  Johnson, 
167  Fed.  102  (C.  C.  A,  —  Wash.). 

If  proved,  he  is  entitled  to  exemplary  damages  against  those  actuated 
by  mahce.    St.  Louis  Ry.  v.  Thompsoin,  102  Tex.  89,  113  S.  W.  144. 

A  national  union  was  held  Uable  for  expulsion  by  a  local  in  disre- 
gard of  rules  requiring  procedure  for  it.  Schouten  v.  Alpine,  137  N. 
Y.  S.  380,  77  Misc.  19. 

Union  member  fined  and  expelled  sued  local  council  for  damages. 
Pending  the  suit  he  appealed  within  the  order  and  was  reinstated. 
Held:  Appeal  was  not  a  waiver  of  right  to  damages.  Blanchard  v. 
Newark  Council,  77  N.  J.  L.  389,  71  Atl.  1131. 

^  Lahiff  V.  Benev.  Soc,  76  Conn.  648,  57  Atl.  692,  100  A.  S.  R.  1012, 
6.5  L.  R.  A.  92. 

«  CucuriUo  V.  Societa,  92  N.  Y.  S.  420,  102  App.  Div.  276. 

»  McCallion  v.  Hibernia,  etc.  Soc,  70  Cal.  163,  167,  12  Pac.  114 
(members  had  seceded  and  declared  offices  vacant);  Engel  v.  Walsh, 
2.58  111.  98,  105,  101  N.  E.  222  (member  of  union  wlio  had  been  deprived 
of  union  label  was  denied  relief  because  he  did  not  set  forth  the  bj-laws 
and  so  did  not  show  that  he  had  exhausted  all  rights  of  appeal);  Hat- 
field V.  DeLong,  1.56  Ind.  207,  209,  59  N.  E.  483  (church);  Rabb  v. 
Trevelyan,  122  La.  174,  47  So.  455  (bookmaker  sued  race-track  asso- 
ciation for  slander;;  Chamberlain  c.  Lincohi,  129  Mass.  70,  72  (biU  in 

224 


Chap.  V]  EXHAUSTION   OF  REMEDIES  [§  57 

This  obviously  does  not  mean  resort  to  force.^  When 
the  only  appeal  provided  by  the  association  is  to  the 
same  body  that  expelled  him,  the  member  expelled  may 
apply  directly  to  the  cornet, ^  but  in  a  case  where  the  offi- 
cer appealed  from  was  to  preside  over  the  appellate 
body,  the  general  rule  was  applied  and  relief  denied 
until  the  expelled  member  had  taken  the  appeal  pro- 
vided by  the  rules  of  the  order.^  In  one  case  the  rules 
of  a  benefit  association  imposed  the  penalty  of  expul- 

equity  by  claimants  to  office  to  recover  property  from  old  officers); 
Oliver  v.  Hopkins,  144  Mass.  175,  10  N.  E.  776  (bill  in  equity  by  mem- 
bers of  dissolved  lodge  to  recover  funds  declared  forfeited  to  Grand 
Lodge);  Hickey  v.  Baine,  195  Mass.  440,  452,  81  N.  E.  201  (labor  union 
election  contest);  MuLroy  v.  Supreme  Lodge,  28  Mo.  App.  463  (ex- 
pelled member  of  benefit  society) ;  Lafond  v.  Deems,  81  N.  Y.  507,  514 
(bill  for  dissolution  of  benefit  society) ;  White  v.  Brownell,  2  Daly  329, 
357  (stock  exchange);  Strempel  v.  Rubing,  4  N.  Y.  S.  534  (election 
contest);  Levy  v.  U.  S.  Grand  Lodge,  30  N.  Y.  S.  885,  9  Misc.  633 
(election  contest);  Gebhard  v.  N.  Y.  Club,  21  Abb.  N.  C.  248,  252 
(social  club);  ZiUifax  v.  I.  O.  F.,  13  Ont.  L.  R.  155,  8  Ont.  W.  R.  631 
(expulsion). 

He  need  not  enforce  an  appeal  conditioned  on  comphance  with 
findings  below  and  paying  all  expenses.  Weiss  v.  Musical  Union,  189 
Pa.  St.  446,  42  Atl.  118. 

2  Wlien  members  of  an  unincorporated  church  are  excluded  from 
membership  at  a  meeting  which  they  claim  was  not  properly  called, 
they  must  enforce  their  right  to  use  the  church  property  by  an  appeal 
to  the  court  and  not  by  trespass.  Fullbright  v.  Higginbotham,  133 
Mo.  668,  678,  33  N.  E.  777. 

^  Loubat  V.  Le  Roy,  40  Hun  546,  551  (social  club). 

*  Mead  v.  Stii'hng,  62  Conn.  586,  27  Atl.  591  (Masonic  lodge). 

Plaintiff  was  expelled  from  order  of  locomotive  engineers  for  al- 
leged violation  of  a  rule.  He  held  insm'ance  pohcies  in  the  order  as 
required  by  its  rules.  It  appeared  that  he  waived  informahties  of  the 
trial  by  the  order.  But  the  court  held  that  there  was  no  evidence  at 
all  of  commission  by  him  of  the  offense  of  which  he  was  found  guilty 
by  the  order,  viz.,  volunteering  his  advice  to  railroad  on  a  matter  then 
in  controversy  between  raihoad  and  employees.  The  rule  that  all  rights 
of  appeal  within  the  order  must  be  exercised  was  recognized,  but  ex- 
ception allowed  here  because  (1)  the  officer  he  last  appealed  to  would 
preside  at  the  meeting  of  the  Grand  International  Division  to  which 
the  appeal  would  be  taken;  (2)  meeting  to  which  appeal  might  be 
taken  would  be  held  out  of  State  and  at  a  great  distance  and  not  for 
two  years;  (3)  if  not  reinstated  by  a  date  six  months  before  that 
meeting  his  insurance  would  be  forfeited.  Fritz  v.  Knaub,  103  N.  Y.  S. 
1003,  1010. 

225 


§  57]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

sion  on  any  member  who  resorted  to  the  courts  before 
taking  all  appeals  provided  by  the  association.  A 
member  retained  an  attorney  and  was  expelled  under 
the  rule  before  his  suit  was  actually  brought.  He  was 
allowed  relief  in  a  suit  on  his  benefit  certificate.^  The 
appeal  provided  must  be  one  that  can  be  availed  of 
as  of  right  and  not  depend  on  the  discretion  or  favor  of 
any  one  for  its  exercise.*'  When  there  is  no  provision 
for  a  tribunal  to  decide  when  a  member  is  entitled  to 
sick  benefits,  he  may  appeal  to  a  court."  Indeed  it  has 
been  laid  down  as  a  general  rule  that  whereas  in  mere 
matters  of  discipline,  the  member  must  first  exhaust  all 
rights  of  appeal  within  the  association,  a  claim  for 
money  due  by  vutue  of  an  agreement  stands  on  a  dif- 
ferent basis  and  gives  a  right  to  resort  to  the  court  in 
the  first  instance.^ 

5  RameU  v.  Duffy,  81  N.  Y.  S.  600,  82  App.  Div.  496. 

^  Rules  provided  for  expulsion  after  trial  by  jury.  Then  aggrieved 
could  ask  a  delegate  to  the  next  convention  to  ask  the  convention  to 
call  the  jurv  to  account.  Holomany  v.  Nat.  Slavonic  Soc,  57  N.  Y.  S. 
720,  39  App.  Div.  573. 

A  provision  for  reinstatement  is  not  a  right  of  appeal,  nor  is  a  pro- 
vision for  appeal  in  a  resolution  ordering  trial,  but  not  in  the 
by-laws,  sufficient.  Weiss  v.  Musical  Union,  189  Pa.  St.  446,  42 
Atl.  118. 

Not  bound  to  pursue  his  remedy  within  the  order  when  by-laws 
provided  no  remedy  and  demand  for  rehef  was  met  with  unnecessary 
delay.    Schneider  v.  Local  Union,  116  La.  270,  40  So.  700. 

When  the  appellate  body  was  at  an  unreasonable  distance  and  he 
was  refused  access  to  necessary  documents  unless  he  first  i)aid  his  fine 
and  the  offense  for  which  he  was  ex-pelled  was  slander  of  the  presiding 
officer  of  the  appellate  court,  he  was  not  obhged  to  appeal.  Corregan 
V.  Hay,  87  N.  Y.  S.  956,  94  App.  Div.  71. 

'  Dolan  V.  Court  Good  Samaritan,  128  Mass.  437,  439;  Kentucky 
Lodge  V.  White,  5  Ky.  L.  Rep.  418. 

»  Bauer  v.  Samson  Lodge,  102  Ind.  262,  268,  1  N.  E.  571  (cor- 
poration); State  V.  Grand  Lodge,  53  N.  J.  L.  536,  22  Atl.  63 
(dictum). 

Contra.  General  rule  ai)j)li('d  to  a  suit  for  sick  benefit.  Harrington 
V.  Workmen's  A.ss'n,  70  Ga.  310,  342. 

Where  a  by-law  of  a  national  as.sociation  imder  which  property 
rights  of  a  local  were  affected  provided  for  suspension  without  notice, 

220 


Chap.  V]  INTERNAL   AFFAIRS  [§58 

§  58.  Internal  Affairs 

Courts  will  not  as  a  general  rule  interfere  in  the  in- 
ternal affairs  of  non-profit  associations  ^  unless  property 
rights  are  involved.  As  was  said  of  a  church,  ''Reli- 
gious societies  are  regarded  by  the  civil  authorities  as 
other  voluntary  associations,  the  individual  members 
and  separate  bodies  of  which  will  be  held  to  be  bound 
by  the  laws,  usages,  customs  and  principles,  which  are 
accepted  among  them,  upon  the  assumption  that  in 
becoming  parts  of  such  organisms  they  assented  to  be 
bound  by  those  laws,  usages  and  customs  as  so  many 
stipulations  of  a  contract  between  them.  It  is  only  by 
so  regarding  the  association  of  individuals  or  bodies  for 
religious  purposes  that  the  civil  authority  in  this  coun- 
try can  interfere  at  all,  and  then  it  can  interfere  only  so 
far  as  may  be  necessary  to  decide  upon  and  protect 
rights  of  property,  depending  upon  the  contract  be- 
tween the  parties.  And  when  the  contract  has  been 
construed  by  the  parties,  the  court  will,  as  in  other 
cases,  follow  their  own  construction."  ^ 

Ordinarily  courts  accept  the  rules  adopted  by  unin- 
corporated associations.^  When  an  association  by  its 
laws  has  constituted  a  tribunal  to  decide  questions 
affecting  its  internal  affairs,  civil  courts  are  bound  by 
proper  decisions  of  such  tribunal  where  no  property  or 
civil  rights  are  involved. 

"Church  tribunals  ought  to  perform  their  functions 

it  was  unreasonable  and  void  and  it  was  not  necessary  to  appeal  to  the 
biennial  convention.    Swaine  v.  Miller,  72  Mo.  App.  446. 

Contra.  Where  only  membership  rights  involved.  O'Brien  v. 
Musical  Union,  64  N.  J.  Eq.  525,  54  Atl.  150. 

1  Randolph  v.  Southern  Beneficial  League,  7  N.  Y.  S.  135,  139. 

2  First  Presbyterian  Church  v.  Wilson,  77  Ky.  252,  256.  Ace.  Allen 
V.  Roby,  67  So.  899  (Miss.). 

3  Alexander  v.  Bowers,  79  S.  W.  342  (Tex.  Civ.  App.)  (church). 

227 


§  58]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

honestly,  impartially  and  justly,  with  due  regard  to 
their  constitutional  powers,  sound  morals  and  the  rights 
of  all  who  are  interested;  but  if  tyranny,  force,  fraud, 
oppression  or  corruption  prevail,  no  civil  remedy  exists 
for  such  abuse  except  when  it  trenches  upon  some  prop- 
erty or  civil  right."  Hence  a  bill  to  declare  void  the 
union  of  two  Presbyterian  churches  was  dismissed  be- 
cause the  church  as  such  owned  no  property.^ 

A  dispute  over  the  appointment  of  a  pastor  grew  out 
of  the  split  in  the  Evangelical  Alliance.  It  was  held 
that  the  question  should  be  settled  by  the  proper  tri- 
bunal of  the  association;  if  there  was  no  such  tribunal, 
it  was  a  deficiency  that  could  be  supplied  only  by  the 
association.  "  Courts  of  equity,  while  they  may  supply 
remedies  not  available  in  legal  actions,  have  no  jurisdic- 
tion to  supplement  the  powers  of  purely  voluntary  as- 
sociations when  through  improvidence  they  in  practice 
are  found  inadequate.  To  concede  that  voluntary 
associations  cannot  govern  themselves  might  present 
a  convincing  argument  against  allowing  them  at  all  to 
exist,  but  by  no  means  affords  a  justification  for  placing 
them  under  the  guardianship  of  the  State  through  the 
courts."  ^     Some  courts  have  insisted  on  the  right  to 

*  FusseU  V.  Hall,  223  111.  73,  77,  84  N.  E.  42.  Ace.  Landis  v.  Camp- 
beU,  79  Mo.  433,  440. 

6  Powers  V.  Budy,  45  Neb.  208,  63  N.  W.  476.  Ace.  Hatfield  v. 
DeLong,  156  Ind.  207,  210,  59  N.  E.  483. 

An  Episcopal  clergyman  was  tried  in  a  church  court  and  convicted 
of  adultery  and  remov(;d  from  office.  He  sought  certiorari  in  civil 
court.s  addressed  to  the  ecclesiastical  court  on  tlu!  gi'ound  that  it  was 
not  legally  constituted  and  for  irregularities  of  procedure  and  that  it 
had  no  jurisdiction  of  offenses  that  were  civil  crimes.  Held:  The  church 
courts  for  the  pui7)ose  of  church  discifjline  have  jurisdiction  of  offenses 
against  tlu;  civil  law  (p.  409).  Civil  courts  have  no  jurisdiction  by 
certiorari  to  require  the  i)roduction  of  church  records  to  correct  errors 
in  them  when  the  suhjec^t  matter  of  the  judgment  is  of  ecclesiastical 
cognizance.  On  such  suhjec-ts  its  judgment  is  co.ichisive  (p.  417).  A 
niiiiister  has  no  jjroperty  right  in  liis  olhce  for  the  purpose  of  earning 

228 


Chap.  V]  INTERNAL  AFFAIRS  [§  58 

determine  whether  the  court  of  the  association  was 
acting  within  its  jurisdiction.     These  decisions  were, 

a  salary  (p.  417).  When  the  subject  matter  is  of  ecclesiastical  cogni- 
zance and  the  party  accused  is  properly  before  the  court,  it  is  for  the 
court  to  decide  whether  or  not  it  is  properly  organized  to  hear  the  mat- 
ter before  it.  Civil  courts  cannot  review  that  determination  (p.  419). 
Satterlee  v.  Williams,  20  App.  D.  C.  393. 

A  minister  sought  to  enjoin  a  trial  of  him  appointed  by  the  bishop. 
Held :  A  minister  as  a  member  of  a  church  is  bound  by  all  its  rules  and 
laws,  and  if  he  does  not  approve  of  them  his  only  remedy  is  to  withdraw 
(p.  533).  Civil  courts  will  interfere  with  decisions  of  church  judicatories 
only  when  rights  of  property  or  civil  rights  are  involved.  They  will  not 
review  the  decisions  of  such  associations  upon  ecclesiastical  matters 
merely  to  ascertain  then*  jurisdiction  (p.  537).  Dissent  on  ground  that 
question  of  jurisdiction  is  always  open  in  civil  courts.  Chase  v.  Cheney, 
58  111.  509. 

A  spht  in  a  church  denomination  resulted  in  the  appointment  of  two 
rival  pastors  for  the  same  church.  One  with  some  of  his  adherents 
brought  a  bill  in  equity  to  enforce  their  right  to  use  the  church.  The 
issue  depended  upon  the  validity  of  the  calhng  of  a  general  conference. 
This  depended  on  whether  under  the  laws  of  the  church  the  last  preced- 
ing general  conference  could  delegate  to  its  Board  of  Publication  the 
selection  of  the  place  for  the  next.  Held :  The  power  whether  legislative 
or  executive  is  one  that  can  be  delegated.  The  conference  was  properly 
called  and  hence  the  plaintiff  was  properly  appointed  pastor  (p.  433). 
He  may  sue  to  enforce  his  right  because  it  involves  his  salaiy.  His  co- 
plaintiffs  may  sue  to  enforce  their  rights  to  use  the  church  (p.  434).  On 
such  a  question  the  decision  of  a  church  judicatory  is  final  (p.  428). 
Schweicher  v.  Husser,  146  111.  399,  34  N.  E.  1022. 

Same  issue  decided  the  same  way  on  the  ground  that  the  general 
conference  was  the  supreme  judicial,  executive  and  legislative  head  of 
the  denomination  and  that  its  decision  on  an  ecclesiastical  matter  should 
not  be  set  aside  by  the  court.  Auracher  v.  Yerger,  90  la.  558,  567,  58 
N.  W.  893. 

The  decision  of  a  Catholic  bishop  as  the  judicatory  of  the  Roman 
church  must  be  followed  by  the  civil  courts.  Bonacum  v.  Harrington, 
65  Neb.  831,  834,  91  N.  W.  886. 

A  minister  was  tried  and  expelled  by  one  church  court,  which  sen- 
tence was  reversed  on  appeal.  Held:  The  decision  of  the  highest  church 
court  must  prevail.  Dieffendorf  v.  Reformed  Church,  20  Johns.  12, 
14. 

A  pastor  sued  for  his  salary.  The  issue  was  whether  he  had  been 
properly  dismissed  or  not,  and  this  had  been  decided  against  him  by  the 
church  judicatories.  Held:  The  church  court  had  jurisdiction  of  the 
question.  "  If  I  were  less  certain  than  I  am  as  to  the  question  of  jurisdic- 
tion, I  should  give  gi'eat  weight  to  the  decisions  of  these  bodies."  "Hav- 
ing thus  recorded  the  conclusion  that  this  was  an  ecclesiastical  matter 
and  that  the  church  judicatories  had  jurisdiction  of  it,  we  cannot  inquire 
whether  they  have  proceeded  according  to  the  laws  and  usages  of  their 
church  nor  whether  they  have  decided  the  matter  correctly"  (p.  561). 

229 


§  58]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

however,  mostly  in  actions  by  ministers  for  their  sala- 
ries, and  so  a  property  right  was  in  fact  involved.^    A 

The  contract  made  by  a  pastor  of  the  church  by  accepting  a  call  is  termi- 
nable only  by  mutual  consent  or  in  the  mode  specified  in  the  constitu- 
tion and  usages  of  the  church.  Connett  v.  Reformed  Chiu-ch,  54  N.  Y. 
551. 

A  burial  right  was  conditioned  on  the  holder  being  in  communion 
with  the  Roman  CathoUc  church.  Held:  The  decision  of  the  proper 
church  tribunal  was  final  on  this.    McGuire  v.  Trustees,  54  Hun  207,  219. 

The  General  Assembly  of  the  Presbyterian  church  is  not  a  corpora- 
tion. It  imites  in  itself  the  legislative,  executive  and  judicial  functions 
of  government.  It  is  not  subject  to  the  correctional  powers  of  the 
court  other  than  as  far  as  necessary  to  estabhsh  its  identity.  When 
it  proceeded  in  good  faith  to  dissolve  certain  synods  the  court  can- 
not re-examine  its  conclusions.  Comm.  v.  Green,  4  Whart.  531,  598 
(Pa.). 

A  pastor  sued  to  enforce  his  appointment.  The  issue  was  as  to  the 
calling  of  the  annual  conference  of  the  EvangeUcal  AUiance.  Held: 
The  appointment  of  the  place  of  the  next  annual  conference  was  an  ad- 
ministrative function  and  could  be  delegated  (p.  548).  Under  the  disci- 
pline of  the  church,  pastors  are  appointed  by  the  conference  and  the  will 
of  the  majority  of  the  church  does  not  control  (p.  552) .  The  property  of 
the  church  belongs  to  those  who  adhere  to  the  original  organization  and 
not  to  those  who  have  organized  an  independent  one  (p.  551).  Krecker 
V.  Shirey,  163  Pa.  St.  534,  30  Atl.  440. 

A  pastor  has  no  property  rights  in  his  salary,  in  the>absence  of  express 
contract,  that  entitles  him  to  contest  in  the  civil  courts  the  decision  of 
church  tribunals  in  matters  of  church  discipline.  "It  may  be  that  the 
proceedings  were  irregularly  conducted  measured  by  the  disciphnary 
standard ;  that  is  a  question  for  the  ecclesiastical  or  church  revising  au- 
thority and  not  for  the  courts."  Travers  v.  Abbey,  104  Tenn.  665,  669, 
58  S.  W.  247. 

The  decision  of  the  regular  tribunals  of  a  grange  as  to  a  matter  of 
internal  disciphne  (validity  of  admission  of  plaintiff)  is  binding  on  the 
courts.  Non-observance  of  a  by-law  of  the  State  grange  by  locals  with 
knowledge  of  certain  officers  of  State  grange  does  not  abrogate  it. 
Yeaton  v.  Somersworth  Grange,  77  N.  H.  332,  91  Atl.  868. 

"  A  minister  sued  for  a  balance  of  salary,  claiming  that  he  had  been 
dismissed  by  a  body  which  had  no  jurisdiction  of  the  matter.  Held: 
The  i)latform  which  was  the  basis  of  the  general  organization  of  the 
church  being  silent  on  the  point  and  it  depending  on  usage,  that  ques- 
tion of  fact  was  properly  submitted  to  the  jury.  Gibbs  v.  Gilead  Soc, 
38  Conn.  153,  178. 

In  an  action  by  a  dismissed  rector  for  his  salary  the  civil  courts  will 
inquire  into  the  jurisdiction  of  ecclesiastical  tribunal.  Perry  v.  Wheeler, 
75Ky.  .>11. 

A  Catliolic  pri(!Kt  sued  for  his  salary.  The  issue  was  whether  he  had 
been  dismiHsed.  Held:  The  decision  of  the  church  councils  on  such 
matters  are  not  concluHiv(^  until  sanctioned  by  legal  adjudication  in  a 
court  of  law.    It  is  essential  that  their  proceedings  be  so  far  formal  as  to 

230 


Chap.  V]  INTERNAL  AFFAIRS  [§  58 

provision  in  the  constitution  and  by-laws  of  a  benefit 
society  was  held  void  because  it  purported  to  make 
final  the  decision  of  the  arbitrators  on  the  whole  ques- 
tion of  liability.^ 

Although  in  general,  as  in  the  expulsion  cases  above 
mentioned,  the  courts  refuse  to  act  in  contravention 
to  the  regulations  of  the  association  to  which  the  mem- 
ber has  bound  himself  voluntarily,^  they  have  shown  a 

enable  the  court  to  judge  whether  they  have  acted  with  some  regard 
for  the  rights  of  the  accused.  Query,  if  incorporated.  Thompson  v. 
Cathohc  Congregational  Soc,  7  [Pick.  160,  164.  But  when  the  salary 
of  a  priest  depends  on  incumbency  and  not  on  contract  it  is  not  a  prop- 
erty right  enforceable  in  civil  courts.  Hynes  v.  LiUis,  170  S.  W.  396 
(Mo.  App.). 

A  minister  dismissed  by  action  of  his  congregation  sustained  by  the 
General  Assembly  brought  a  bill  in  equity  against  the  General  Assem- 
bly to  declare  its  action  void  on  the  ground  that  the  procedure  on  appeal 
was  not  in  conformity  to  church  law  and  so  void.  Held:  There  was  no 
error  in  a  finding  that  the  procedure  before  the  General  Assembly  was  in 
violation  of  church  law.  Wallace  v.  Trustees  of  General  Assembly,  201 
Pa.  St.  292,  296,  50  Atl.  762. 

But  when  the  tribunal  of  the  association  has  itself  decided  the  ques- 
tion of  jurisdiction  and  that  decision  depends  upon  an  interpretation 
of  the  organic  law  of  the  association,  courts  should  accept  it.  See 
§61. 

7  Daniher  v.  Grand  Lodge,  10  Utah  110,  123,  37  Pac.  245. 

Injunction  against  arbitration  committee  of  an  exchange  was  denied 
because  the  agreement  to  arbitrate  involved  in  assenting  to  its  constitu- 
tion was  void  under  a  statute  making  all  agreements  to  arbitrate  revok- 
able.    Heath  v.  N.  Y.  Gold  Exchange,  38  How.  Pr.  168. 

An  agreement  to  appeal  to  the  Grand  Lodge  contained  in  the  by-laws 
of  a  benefit  society  held  not  binding  so  far  as  it  relates  to  property  in- 
terests.   Poultney  v.  Bachman,  10  Abb.  N.  C.  252  (N.  Y.). 

^  A  statute  provided  for  calHng  meetings  of  "parishes"  or  "rehgious 
societies."  A  lease  had  been  authorized  at  a  meeting  called  otherwise  but 
according  to  by-laws.  Held :  Records  of  organization  and  since  indicate 
that  they  have  regarded  themselves  as  a  body  of  proprietors  of  the  house 
of  worship  and  not  a  parish  or  religious  society.  They  call  their  meetings, 
meetings  of  stockliolders.  Hence  the  by-laws  and  meeting  and  lease 
were  vahd.  {Semble  private  rather  than  public  organization.)  Cogs- 
weU  V.  BuUock,  13  Allen  90,  92. 

A  by-law  of  a  national  order  required  a  report  on  amendment  to  be 
made  at  next  meeting.  In  fact,  the  committee  was  continued  from  time 
to  time  and  finally  reported  at  subsequent  meeting  where  report  and 
amendment  were  adopted.  No  question  was  raised  as  to  right  to  thus 
act.  Local  lodge  divided  on  issue.  Held:  The  essential  spirit  of  the 
article  about  amendment  had  been  observed.     Cannot  say  action  in- 

231 


§  58]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

tendency  to  depart  from  this  and  consider  the  reasona- 
bleness of  the  regulations  when  questions  of  property 
are  involved.^    WTiile  thej^  profess  to  refuse  to  decide 

valid  by  reason  of  non-compliance  with  Art.  30.  The  changes  were  not 
so  radical  as  to  be  bevond  the  power  of  national  bodj'.  Goulding  v. 
Standish,  182  Mass.  401,  404,  65  X.  E.  803. 

A  court  will  inquire  into  questions  of  doctrine  onlj'  to  decide  a  ques- 
tion of  propertj'  of  a  church.  Hendrickson  v.  Shotwell,  1  X.  J.  Eq.  577, 
671,  682. 

A  Mason  was  indited  for  Hbel.  He  sought  to  enjoin  a  Masonic  trial 
to  be  held  before  his  criminal  trial  for  reason  that  he  would  be  forced  to 
disclose  e\"idence,  etc.  Held:  Plaintiff  voluntarily  submitted  himself  to 
rules  of  the  order  and  must  stand  trial  accordmg  to  those  rules.  It 
seems  to  be  done  in  good  faith.  He  has  no  property  right  of  which  he  is 
being  deprived  because  his  only  right  is  to  enjoy  the  property  of  the 
order  while  a  member  in  good  standing.  Franklin  v.  Bumham,  82 
N.  Y.  S.  882,  40  ^Hsc.  566. 

BiU  alleged  that  a  minoritj'  of  local  body  voted  that  aU  members 
who  did  not  contribute  81  a  year  towards  building  hall  by  Grand  Lodge 
should  not  be  permitted  to  attend  meetings.  Answer,  that  lodge 
simply  obeyed  an  order  of  Grand  Lodge  according  to  its  rule.  Held: 
Bill  dismissed.    Bauer  v.  Seegar,  2  Weekly  Xotes  Cas.  (Pa.)  242. 

Injimction  granted  to  restrain  defendant  from  occupying  chair  at 
meetings.  There  was  a  rule  of  the  lodge  as  to  one  under  charges.  He 
had  been  tried,  but  the  supreme  council  ordered  a  new  trial.  Held : 
This  was  aU  regular  and  he  is  still  under  charges  and  not  entitled  to 
occupy  the  chair.  Courts  have  jurisdiction  to  enforce  rules  of  these 
societies.  Potter  v.  Search,  7  Phila.  (Pa.)  443,  449.  See  People  v. 
Chicago  Board  of  Trade,  80  111.  134,  137  (which  held  that  the  same  rule 
apphes  to  corporations). 

9  See  Littleton  v.  1.  O.  U.  A.  M.,  98  Md.  453,  461,  56  Atl.  798  (where 
the  rule  of  a  benefit  society  was  apphed). 

Members  of  a  board  of  fire  unden\Titers  established  rules  regulating 
the  number  of  soMcitors  who  might  be  emploj'ed  by  members  and  who 
they  should  be,  etc.,  practically  restraining  the  business  of  members. 
Certain  members  sought  to  enjoin  enforcement  of  the  penaltj'  of  viola- 
tion of  these  regulations,  viz.,  no  intercourse  with  other  members. 
Held:  ^^'he^e  there  are  property  rights,  as  here,  equity  will  interfere 
when  by-laws  are  a  departure  from  the  object  of  the  society,  violate 
the  public  policy  of  the  State  or  are  unjust  or  unreasonable.  This 
was  illegal  as  in  restraint  of  trade.  Huston  v.  Rentlinger,  91  Ky.  333, 
344,  15  S.  W.  867.  Ace.  Rudolph  v.  Soutliem  Beneficial  League,  7 
N.  Y.  S.  135,  139  (transfer  of  all  its  property  by  its  officers). 

Bill  to  recover  possession  of  property  of  a  local  lodge  confiscated  by 
grand  lodge  under  proceedings  authorized  by  its  by-laws.  Defendants 
were  members  of  local  body.  Held:  Members  bound  by  such  agree- 
ment only  if  it  clearly  appears  that  they  assented  to  it.  It  does  not 
appear  that  by-laws  of  local  lodge  adopted  by-laws  of  gi-and  lodge. 
But  even  if  they  did,  it  would  not  be  binding.    Cannot  make  a  binding 

232 


Chap.  V]  INTERNAL  AFFAIRS  [§  58 

contested  elections  to  office  as  such,^°  when  one  claiming 
to  be  an  officer  seeks  possession  of  property  of  the  asso- 
ciation held  by  a  rival  claimant  the  court  has  to  decide 
which  is  the  officer  de  jure  in  order  to  decide  who  is 
entitled  to  the  property. ^^  Ordinarily  the  vote  of  a 
majority  of  those  attending  a  meeting  is  decisive.^^    No 

agreement  in  advance  to  submit  to  arbitration.  May  revoke  up  to 
last  moment.  Courts  of  justice  cannot  be  caUed  on  to  enforce  decrees 
of  these  seK-created  judicatories.  Austin  v.  Searing,  16  N.  Y.  112,  123, 
69  Am.  Dec.  665. 

By-law  of  pilots'  association  that  one  refusing  to  go  on  a  boat  in 
turn  shall  be  considered  on  sick  leave  and  have  sick  leave  pay  is  not  so 
unreasonable  that  it  can  be  set  aside.  Marshall  v.  Virden,  19  Fa.  Sup. 
Ct.  245,  251. 

"  One  claiming  to  be  the  legitimate  successor  of  Dowie  as  head  of 
his  church  sought  an  injunction  against  another  making  the  same 
claim.  Held:  As  no  property  rights  are 'involved,  equity  will  not  in- 
terfere.    Lewis  V.  Vohva,  154  111.  App.  48,  51. 

Quo  warranto  to  inquire  into  the  vaUdity  of  the  election  of  deacons 
of  a  church  was  dismissed  because  they  were  not  officers  of  the  church 
corporation  but  of  an  unincoi'porated  association  over  the  election  of 
whom  the  courts  have  no  control.'  The  fact  that  they  are  by  statute 
ex-officio  trustees  of  the  corporation  does  not  give  the  State  the  right 
to  interfere  (Cooley,  C.  J.).  Attorney  General  v.  GeerUngs,  55  Mich. 
562,  22  N.  W.  89. 

Plaintiff  sues  to  enforce  his  right  to  office  of  Grand of Or- 
der against  another  claimant.  Contested  election.  Did  not  appear 
any  salary  attached  to  office.  Held :  Courts  will  not  interfere  with  in- 
ternal affairs  of  unincorporated  associations  unless  act  complained  of 
was  a  violation  of  rules  of  order  and  plaintiff  was  thereby  deprived  of  a 
civil  or  property  right.  Gaines  v.  Farmer,  55  Tex.  Civ.  App.  601,  119 
S.  W.  874,  877. 

11  Petition  for  mandamus  by  new  treasurer  to  compel  old  treasurer 
of  unincorporated  social  body  to  turn  over  books.  Held:  Denied  be- 
cause not  duly  elected.  Notice  of  meeting  not  given  to  some  of  du-ectors 
and  the  term  of  office  of  directors  had  not  commenced.  Grand  Rapids 
Guard  v.  Bulkley,  97  Mich.  610,  57  N.  W.  188. 

Where  an  officer  of  a  religious  society  is  duly  appointed  for  no  defi- 
nite term,  the  presumption  is  that  he  remains  in  office  tiU  competent 
evidence  of  his  due  removal  is  given,  and  whoever  claims  it  on  that 
ground  must  estabfish  it.  Hendrickson  v.  Shotwell,  1  N.  J.  Eq.  577, 
600.    Ace.  Tanner  v.  Ranken,  89  N.  Y.  S.  770,  44  Misc.  488. 

Election  at  a  special  meeting  of  which  all  were  not  notified  was  held 
illegal  in  a  suit  by  an  officer  to  recover  possession  of  paraphernaha. 
Goller  V.  Strubenhaus,  134  N.  Y.  S.  1043,  1049.  Ace.  Whitty  v.  McCar- 
thy, 20  R.  I.  792,  36  Atl.  129  (fraternal  order). 

1^  Goesele  v.   Buneler,    14  How.   589,   608   (communistic  society); 

233 


§  58]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

meeting  can  bind  a  majority  of  a  subsequent  meeting  by 

Bouldin  v.  Alexander,  15  Wall.  131,  140  (church);  Foreman  v.  Fayer- 
son,  135  La.  221,  65  So.  131.  Hetchett  v.  Mt.  Pleasant  Church,  46  Ark. 
291,  295  (injunction  against  preacher  dismissed  by  majority  vote). 
Trustees  v.  Proctor,  66  111.  11  (injunction  refused  where  majority  voted 
to  retain  preacher).  Turpin  v.  Bagby,  138  Mo.  7,  10,  39  S.  W.  455 
(trustees  elected  by  majority  faction  in  Baptist  church  retained  prop- 
erty). Fau-  V.  First  Church,  57  N.  J.  Eq.  496,  501,  42  Atl.  166  (major- 
ity of  Methodist  church  voted  sale  of  edifice).  Conference  v.  Allen, 
156  N.  C.  524,  72  S.  E.  617  (removal  of  trustees  of  a  Congregational 
church).  Windley  v.  McChney,  161  N.  C.  318,  77  S.  E.  226  (majority  of 
Baptist  church  adopted  "  discipline  of  a  certain  conference."  No  change 
in  doctrine);  Henry  v.  Deitrick,  84  Pa.  St.  286,  294  (church);  Horton  v. 
Chester  Baptist  Church,  34  Vt.  309,  317  (agreement  to  compromise  a 
wiU). 

By  the  constitution  of  an  unincorporated  church  the  management 
of  its  affairs  was  vested  in  the  "whole"  congregation.  Held:  This 
meant  a  meeting  at  which  all  had  an  opportunity  to  attend,  but  not 
that  unanimous  consent  be  requisite.  The  chm^ch  being  congrega- 
tional in  pohty  and  independent  could  act  by  a  majority  and  so  amend 
its  constitution  (at  least  if  it  worked  no  change  in  the  purpose  of  the 
organization)  and  may  incorporate.  Duessel  v.  Proch,  78  Conn.  343, 
349,  62  Atl.  152. 

Majority  excluded  by  a  minority  are  not  seceders  if  they  organize 
separately.    Bates  v.  Huston,  66  Ga.  198,  200. 

Where  a  church  is  strictly  independent  questions  of  doctrine  or 
form  of  worship  are  to  be  decided  by  a  majority  of  members  or  by  any 
local  officers  or  tribunal  created  by  the  church  for  the  purpose.  Where 
elders  are  elected  for  that  purpose,  instrumental  music  cannot  be  in- 
troduced in  the  service  against  their  will  without  some  action  by  the 
majority  in  accordance  with  the  rules.  Hackney  v.  Vawter,  39  Kan. 
615,  629,  18  Pac.  699. 

A  church  which  had  never  formally  adopted  any  confession  of  faith 
but  for  years  had  sent  delegates  to  a  District  Synod  adhering  to  the 
belief  of  one  sect  of  denomination  had  a  right  to  elect  a  pastor  who  ad- 
hered to  the  behef  of  the  other  sect  and  a  minority  could  not  restrain 
him  from  acting  as  such  or  from  using  the  church  property.  Ehren- 
feld's  Appeal,  101  Pa.  St.  186. 

Where  majority  rule  was  agreed  upon  in  the  constitution  which 
united  two  religious  congregations  a  minority  cannot  thereafter  claim 
title  to  any  part  of  the  real  estate  owned  by  the  association,  but  hav- 
ing been  allowed  to  build  a  separate  chvu'(;h  on  a  part  of  the  land  and 
occupy  it  for  years  the  original  congi-egation  are  estopped  in  equity  to 
assert  their  title.  St.  Paul's  Church  v.  Hower,  191  Pa.  306,  311,  43 
Atl.  221. 

At  the  close  of  the  Civil  War  a  minority  of  a  congregation  for  political 
rca-sons  excluded  the  majority.  The  issue  was  on  joining  the  North  or 
South  branch  of  \\w.  Presbyterian  church.  Held:  Tlie  minority  is  not 
th(!  church  and  could  not  arl)itrarily  exclude  the  majority  or  act  as  the 
church  therejiftcr.     DcadcTick  v.  Lampson,  58  Teim.  523,  534. 

A  majority  of  a  lodge  formed  a  new  one.    Then  voted  most  of  funds 

234 


Chap.  V]  ,  INTERNAL  AFFAIRS  [§58 

irrepealable  acts  or  rules  of  procedure. ^^  The  meeting 
must  follow  due  notice  in  accordance  with  the  by-laws. ^^ 
The  common  parliamentary  rules  in  use  by  deliberate 
assemblies  in  this  country  should  be  resorted  to,  in  the 
absence  of  any  made  by  the  association  itself,  in  consid- 
ering the  regularity  of  its  proceedings.^^    If  the  associa- 

of  old  as  back  salaries  to  secretary  and  treasurer,  who  later  loaned  it  to 
new  lodge.  Held:  Majority  cannot  divert  funds  of  lodge.  Action  of 
lodge  in  paying  bills  will  not  be  scanned  closely  but  will  be  given  great 
weight  if  done  in  good  faith.  Here  it  was  a  mere  subterfuge  to  divert 
funds.    Bachman  v.  Hofman,  104  111.  App.  159,  183. 

An  oral  vote  of  which  no  record  is  kept  is  insufficient  to  ratify  an  un- 
authorized conveyance  of  property.  Hubbard  v.  German  Cathohc  Soc, 
34  la.  31,  39. 

1'  Richardson  v.  Francestown  Union  Cong.  Soc,  58  N.  H.  187,  189. 
Ace.  Goesele  v.  Bimeler,  14  How.  589,  608,  and  Smith  v.  Nelson,  18  Vt. 
511,  550. 

In  a  church  having  a  congregational  form  of  government  two  fac- 
tions arose  over  questions  of  doctrme.  At  a  meeting  of  the  church  one 
faction  agreed  to  sell  its  interest  in  the  church  to  the  other.  At  a  later 
meeting  before  this  was  done  a  majority  of  the  congregation  voted  to 
rescind  the  former  action.  Held:  The  majority  rules  and  the  second 
meeting  had  power  to  set  aside  the  former  action.  Such  vote  was  a  good 
defense  to  action  on  the  contract.  Action  need  not  be  by  a  majority  of 
all  the  members,  a  majority  of  those  attending  is  sufficient  if  all  have  an 
opportunity  to  attend.    Bottom  v.  Tinsley,  134  S.  W.  833. 

^*  When  the  canon  of  an  Episcopal  church  required  notice  during 
divine  service  of  an  election  of  vestrymen,  a  notice  given  at  a  service 
held  by  one  claiming  to  have  been  elected  rector,  which  service  was  held 
at  an  ususual  hour,  is  insufficient.  Dahl  v.  Palache,  68  Cal.  248,  9 
Pac.  94. 

Action  for  salary  by  a  dismissed  pastor  against  trustees  of  a  church. 
Held:  He  cannot  object  to  the  notice  given  of  the  meeting  that  dis- 
missed him  because  he  advised  that  it  be  held,  gave  notice  of  it  and 
participated  in  it.  Helbig  v.  Rosenberg,  86  la.  159,  164,  53  N.  W. 
111. 

A  church  society  was  composed  of  pew  holders.  Though  the  con- 
stitution required  fourteen  days'  notice  of  a  meeting  the  rule  had  not 
been  comphed  with  for  many  years.  It  was  not  complied  with  in  call- 
ing a  meeting  which  voted  to  move  the  church  building  to  another  town. 
Held:  The  vote  as  taken  was  invalid.  Query,  if  a  vahd  meeting  could 
have  authorized  the  change  against  the  wiU  of  pew  holders.  Small  v. 
Cahoon,  207  Mass.  359,  364,  93  N.  E.  588. 

^^  An  appointment  by  a  religious  society  of  an  agent  to  receive  its 
share  of  a  fund  for  reUgious  purposes  must  be  by  vote  and  not  by  sig- 
nature of  the  individual  members.  State  v.  Trustees,  11  Ohio  24, 
28. 

When  the  term  of  office  of  trustees  of  a  church  has  not  expired  and 

235 


§  58]  NON-PROFIT  ASSOCIATIONS   ^  [Chap.  V 

tion  has  no  rtiles,  it  may  adopt  rules  at  any  meeting.^^ 
If  it  adopts  by  custom  rules  contrary  to  the  usual  par- 

they  have  not  resigned,  a  new  election  held  on  the  announcement  of  the 
chairman  that  their  offices  were  vacant  is  void.  Bristor  v.  Burr,  12 
N.  Y.  St.  Rep.  638  (Sup.  Ct.). 

Informal  association  to  raise  money  to  build  a  soldiers'  monument. 
A  minorit}^,  including  president  and  treasurer,  refused  to  abide  by  vote 
of  majority  as  to  its  appUcation  and  withdrew  from  the  meeting.  A  suc- 
cessor president  was  elected  and  the  old  one  brings  bill  to  enforce  his 
right  to  the  office.  Held :  He  had  no  vested  right  in  the  office.  As  there 
were  no  rules  of  the  association  there  was  no  definite  tenure  of  the  office 
of  president  and  a  new  one  could  be  elected  at  the  pleasure  of  the  asso- 
ciation. In  order  to  pass  upon  its  rights  and  powers,  as  well  as  those  of 
its  members,  "both  the  law  of  corporations  and  the  law  of  co-partner- 
ship are  to  be  resorted  to,  in  the  absence  of  satisfactory  regulations,  the 
choice  being  determined  by  the  nature  of  the  feature  under  considera- 
tion."   Ostrom  V.  Greene,  161  N.  Y.  353,  360,  55  N.  E.  919. 

It  was  held  that  the  constitution  of  an  association  of  churches  con- 
templated that  a  majority  of  the  members  present  at  any  regular  meet- 
ing should  govern  the  association,  even  though  they  are  a  minority  of 
the  whole  body.  Hence  contrary  action  of  a  majority  at  an  irregular 
meeting  did  not  prevail.  "A  voluntaiy  association  has  no  existence  or 
power  except  as  contained  in  its  fonnal  articles  of  agreement  or  estab- 
lished by  custoiti  acquiesced  in  by  the  parties  to  it.  When  the  asso- 
ciation consists,  as  here,  of  the  annual  meeting  of  delegates  from  its 
constituent  members  —  the  churches  —  to  further  certain  common  inter- 
ests, the  organization  is  dissolved  upon  adjom-nment  into  its  individual 
elements  until  reassembled  pursuant  to  the  common  agreement." 
Kerr  v.  Hicks,  154  N.  C.  267,  268,  70  S.  E.  468. 

In  a  church  organized  on  the  strictly  Congregational  principle  the 
wiU  of  a  majority  must  govern  and  that  must  be  expressed  in  the  ordi- 
nary mode  at  the  meetings  of  the  church,  not  by  holding  separate  un- 
authorized meetings  and  purportmg  to  depose  existing  officers.  Long 
V.  Harvey,  177  Pa.  473,  480,  35  Atl.  869. 

When  a  motion  to  adjourn  is  declared  adopted  by  the  moderator  of 
a  Congregational  church  and  some  remain  and  reorganize  the  meeting 
and  thereafter  two  separate  organizations  are  maintained,  that  which 
in  fact  had  a  majority  will  be  deemed  the  original  church  and  entitled  to 
its  property.  The  announcement  of  the  result  of  the  vote  by  the  moder- 
ator is  not  binding  if  clearly  false  and  fraudulent.  Gipson  v.  Morris,  31 
Tex.  Civ.  App.  645,  647,  649,  73  S.  W.  85. 

They  must  act  at  a  meeting  and  not  by  signed  petition.  Barton  v. 
Fitzpatrick,  65  So.  390  (Ala.). 

'6  Farmers'  telephone  line.  "But  this  association  had  no  consti- 
tution, rules  or  by-laws.  At  any  meeting  duly  held  it  had  a  right  to 
adopt  such  rules  as  it  saw  fit,  except  that  it  coukl  not  do  an  illegal  act 
or  adopt,  any  measure  subversive  to  the  object  for  which  it  was  formed." 
"It  is  not  the  i)rovince  of  the  courts  to  pass  upon  the  wisdom  or  fairness 
of  the  policy  indicated  in  tlu>  resolution,  so  long  as  it  attemi)t(Hl  nothing 
8ubvcrsivc  to  the  puipose  for  which  the  association  was  organized." 

236 


Chap.  V]  INTERNAL  AFFAIRS  [§  58 

liamentary  rules,  they  are  equally  binding. ^^  The  State 
will,  of  course,  punish  an  illegal  act  even  if  done  in  ac- 
cordance with  the  by-laws  of  a  voluntary  association 
to  which  the  victim  has  assented  ^^  and  the  courts 
will  not  enforce  a  penalty  for  refusal  to  do  an  illegal 
act.^9 

Branagan  v.  Buckman,  122  N.  Y.  S.  610,  67  Misc.  242,  aff'd  130  N.  Y. 
S.  1106,  145  App.  Div.  950. 

"  By  the  customs  of  the  society  of  Friends  decision  is  not  made  by  a 
majority  vote  or  by  any  vote,  but  by  the  recording  by  the  clerk  of  the 
"sense  of  the  meeting."  The  clerk  has  the  right  to  open  the  meeting. 
Hence  when  a  majority  of  a  meeting  attempted  by  force  to  deprive  him 
of  that  right  and  he  withdrew  with  others  and  organized  the  meeting 
elsewhere,  a  treasurer  appointed  at  the  latter  meeting  and  duly  re- 
corded by  the  clerk  was  legally  entitled  to  the  office  and  a  payment 
made  by  the  defendant  to  him  was  good  payment  of  the  note  in  suit. 
Field  V.  Field,  9  Wend.  394,  401.  Ace.  Earle  v.  Wood,  8  Cush.  430, 
454. 

In  a  controversy  as  to  the  marketabihty  of  a  title  which  had  passed 
through  the  trustees  of  an  unincorporated  society  of  Shakers  it  was  con- 
tended that  it  did  not  appear  that  the  trustees  acted  with  the  consent 
of  the  ministry  and  elders  evidenced  by  vote  at  a  formal  meeting.  It 
did  appear  that  consent  had  been  obtained  informally.  Held:  Since 
not  organized  under  some  act  of  legislature  the  society  was  unincor- 
porated and  could  make  its  own  rules  of  action.  Title  did  not  vest  in  all 
the  members  because  of  a  statute  empowering  its  trustees  to  hold  title. 
Since  it  was  never  the  custom  of  the  society  to  act  in  formal  meetings, 
this  must  be  accepted  as  their  own  intei-pretation  of  the  "covenant" 
which  forms  their  constitution  and  so  there  was  no  need  of  a  formal  vote 
to  authorize  the  conveyance.  Feiner  v.  Reiss,  90  N.  Y.  S.  568,  98  App. 
Div.  568. 

'^  State  V.  Williams,  75  N.  C.  134  (initiation  c,eremony). 

1^  An  employers'  association  cannot  enforce  a  penalty  on  a  member 
for  refusal  to  obey  an  order  to  employ  only  members  of  a  particular  labor 
imion  because  such  order  is  against  pubhc  policy  and  void,  because  it 
operated  generally  through  the  community  and  might  prevent  craftsmen 
from  getting  work  at  their  trade.  McCord  v.  Thompson-Starrett  Co., 
113  N.  Y.  S.  385,  129  App.  Div.  130. 

Action  on  bond  given  by  a  member  of  an  employers'  association  on 
joining  to  obey  orders  of  association  as  to  relations  with  employees.  In 
a  strike  the  association  decided  not  to  employ  men  unless  they  signed 
an  arbitration  agreement  and  so  notified  defendant.  He  disobeyed  and 
was  sued  on  bond.  Held :  Bond  vahd,  and  so  was  association.  Pm-pose 
was  stabihty  in  building  trades.  Defendant  bound  by  rules  of  associa- 
tion he  joined.  Trust,  etc.  Co.  v.  Waldhauer,  95  N.  Y.  S.  222,  226,  47 
Misc.  7. 


237 


§  59]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

§59.   "Ultra  Vires" 

There  is  a  tendency  to  apply  to  non-profit  associa- 
tions the  phrase  ultra  vires,  borrowed  from  the  law 
of  corporations.  This  gives  much  comfort  to  those  who 
contend  that  the  common  law  recognizes  the  existence 
of  associations  as  something  distinct  from  their  mem- 
bers. Thus  a  trade  union  was  forbidden  to  apply  its 
funds  to  pay  election  expenses  or  to  maintain  labor 
members  of  parliament  because  outside  the  objects 
expressly  or  impliedly  included  in  the  act  legalizing 
their  existence,^  and  this  conception  was  applied  in  the 
Free  Church  case.^  The  phrase  has  been  used  occa- 
sionally in  cases  in  this  country,^  and  the  essence  of  the 
doctrine  has  been  applied  in  many  cases.  Most  of  them, 
ho"vyever,  were  suits  for  control  of  property  of  the  asso- 
ciation, and  as  we  shall  see  presently  were  explained  by 
an  application,  somewhat  forced,  of  the  doctrines  of  the 
law  of  trusts.^  In  a  few  cases  the  conception  of  the 
court  seems  to  have  been  that  of  ultra  vires  and  it  is 
submitted  that  this  is  the  correct  principle.^ 

1  Amal.  Soc.  v.  Osborne,  (1910)  A.  C.  87. 

Brett,  L.  J.,  used  the  term  ultra  vires  with  reference  to  expulsion 
from  a  social  club  in  Dawkins  v.  Antrobus,  L.  R.  17  Ch.  D.  615,  630. 

2  See  §  61,  note  32. 

3  Everett  v.  First  Presbyterian  Church,  53  N.  J.  Eq.  500,  510,  32 
Atl.  747. 

The  installation  of  an  exchange  was  said  to  be  not  ultra  vires  for  an 
informal  farmers'  telephone  association.  Francis  v.  Perry,  144  N.  Y.  S. 
167. 

«  See  §  61. 

'  When  no  writing  defines  their  powers,  a  majority  of  those  who 
attend  any  meeting  have  a  right  to  decide,  but  they  must  keep  within 
the  HCoj)(!  of  the  ol)j(H;t  of  the  a.ssociation.  "As  in  partnerships  and 
corporations,  the  majority  can  only  govern  within  tlie  object  for  which 
the  jiartnrT.ship  or  coqKjrat  ion  was  formed."  Association  to  hire  miU- 
tary  HubsMlut.es.    Abels  v.  Mr.Kvvn,  18  N.  .1.  Eq.  462,  465. 

"At  common  law  every  ])!irt icipant  in  a  voluntary  society  has  the 
absolute  right  which  the  court  will  i)rotect  of  having  its  property  con- 

238 


Chap.  V]  PROPERTY  [§  60 

§  60.  Property 

The  problem  of  adapting  our  individualistic  law  of 
real  property  to  the  needs  of  associations  has  seemed  as 
difficult  of  solution  in  the  case  of  non-profit  associa- 
tions as  in  that  of  partnerships,  —  the  States  dividing 
on  the  questions  in  about  the  same  way.  In  most  juris- 
dictions the  rule  is  that  an  unincorporated  association 
cannot  in  its  aggregate  capacity  take  title  to  lands  in 
grant.  ''A  valid  grant  to  such  a  community  can  only 
be  made  to  the  individuals  composing  it  or  to  an  indi- 
vidual and  his  heirs  in  trust  for  its  use."  ^  ''A  grant  to 
such  association  eo  nomine  would  pass  no  title."  -  So 
a  reservation  for  the  benefit  of  an  association  is  void.^ 
The  reason  given  for  declaring  invalid  deeds  to  associa- 
tions is  that  they  are  void  for  uncertainty.^ 

trolled  and  administered  according  to  its  organic  plan  and  to  partici- 
pate in  its  affairs  in  harmony  therewith."  But  under  statute  a  re- 
ligious society  had  right  to  incorporate  against  will  of  some.  Temple 
V.  Vincent,  127  Wis.  93,  105  N.  W.  1026,  1028. 

1  Goesele  v.  Bimeler,  5  McLean  223,  10  Fed.  Cas.  No.  5503  (parti- 
tion of  property  of  sociahstic  community)  aff'd  in  14  How.  589;  Gewin 
V.  Mt.  Pilgrim  Church,  166  Ala.  345,  51  So.  947  (church) ;  East  Haddam 
Church  V.  East  Haddam  Soc,  44  Conn.  259  (bill  to  set  aside  a  con- 
veyance. Plaintiff  was  unincoiporated  association.  "As  such  they 
are  not  the  legal  owners  of  the  property  in  question  and  by  the  law  of 
this  State  cannot  own  real  estate");  Jackson  v.  Cory,  8  Johns.  385, 
388  (ejectment  of  land  conveyed  to  the  "people  of"  a  county,  not 
incorporated) ;  Liggett  v.  Ladd,  17  Ore.  89,  95,  21  Pac.  133  (bill  to  en- 
force a  conditional  Limitation). 

Deacons  of  an  unincorporated  church  cannot  as  such  claim  title  by 
prescription  to  a  spring  used  for  baptismal  purposes.  They  hold  no 
office  recognized  by  secular  com-ts.  "The  church  society  collectively, 
being  unincoi-porated,  was  without  capacity  to  acquire  or  hold  title." 
Stewart  v.  White,  128  Ala.  202,  208,  30  So.  526. 

2  Attorney  General  v.  Federal  St.,  3  Gray  1,  44;  German  Land 
Ass'n  V.  SchoUer,  10  Minn.  331,  338  (bill  in  equity  to  enforce  trust 
inter  vivos).    See  also  Reding  v.  Anderson,  72  la.  498,  34  N.  W.  300. 

^  Hornbeck  v.  Westbrook,  9  Johns.  73,  74  (land  conveyed  subject 
to  a  proviso  for  the  benefit  of  the  inhabitants  of  a  town,  not  incor- 
porated). 

*  Hornbeck  v.  Westbrook,  9  Johns.  73,  74. 

239 


§  60]  NON-PROFIT  ASSOCL\TIONS  [Chap.  V 

Property  may,  however,  be  acquired  by  trustees  for 
the  benefit  of  an  unincorporated  association,^  if  this  is 
not  obnoxious  to  the  rule  against  perpetuities.^  A 
conveyance  in  trust  for  an  unincorporated  association 
is  not  a  pubUc  charity.  Those  who  take  the  equitable 
interest  are  capable  of  ascertainment."  "^Tiere  a  fund 
is  raised  by  contributions  of  members  for  a  specific 
purpose,  a  subsequent  decision  of  a  majorit}^  of  the 
members  to  apply  it  for  a  different  purpose  can  be 
enjoined  by  minority  contributors  and  equity  will 
enforce  the  original  trust. ^  \Mien  a  fund  is  raised  by 
contributions  of  members  not  for  the  benefit  of  some 
specific  beneficiary",  but  to  acquire  certain  property, 
title  to  which  is  taken  in  the  name  of  some  individual 

5  :\IendeiihaU  v.  First  Church,  177  Ind.  336,  98  N.  E.  57;  Earle  v. 
Wood,  S  Cush.  430,  445;  Attorney  General  v.  Federal  St.,  3  Gray  1, 
44;  Martin  v.  Board.  149  Wis.  IS,  134  N.  W.  1125. 

An  unincorporated  church  is  without  capacity  to  hold  legal  title. 
An  agreement  to  conyey  to  trustees  for  it  did  not  create  a  charitable 
use.  Yet  chancery-  has  jurisdiction  over  such  associations  and  their 
property  because  of  the  trust  nature  of  their  property  and  will  compel 
conveyance  under  the  contract  to  a  church  corporation  formed  by  the 
majorit}'.    Gewin  v.  Mt.  Pilgrim  Church,  166  Ala.  345.  51  So.  947. 

A  treasurer  of  an  unincoiporated  chiu-ch  holds  as  trustee  for  the 
church  its  funds  raised  for  the  support  of  the  poor  and  for  other  church 
purposes.     Weld  v.  May,  9  Cush.  181,  189. 

*  Thus  a  gift  in  trust  for  an  unincorporated  reUgious  society  is  not 
obnoxious  to  the  rule  against  perpetuities  which  prevent  ahenation 
because-the  entire  interest  at  am-  time  is  represented  by  known  liv- 
ing persons;  that  is,  the  legal  estate  bj'  the  trustees  and  the  equitable 
interest  by  those  persons  who  then  constitute  the  association,  who 
may  be  ascertained  according  to  its  rules  governing  membership.  Old 
South  Society  v.  Crocker,  119  Mass.  1,  23. 

^  The  custom  of  permitting  the  pubUc  to  attend  worship  in  a  church 
does  not  divest  the  association  of  its  private  character  or  its  right  to 
exclude  the  public.  Attorney  General  v.  Federal  St.,  3  Gray  1,  49,  50; 
Old  South  Society  v.  Crocker,  119  Mass.  1,  23. 

The  several  associations  are  so  far  entities  that  thej*  are  represented 
in  court  by  members  who  an.swer  for  themselves  and  all  other  members. 
Mannix  v.  Purcell,  40  Ohio  St.  102,  141,  19  N.  E.  72. 

»  Lcathomian  v.  Wolf,  240  Pa.  St.  557,  566,  88  Atl.  17  (money  raised 
by  an  a.ssociation  for  a  national  orphan  home  of  a  fraternal  order. 
Majority  voted  it  for  a  local  home). 

240 


Chap.  V]  PROPERTY  [§  60 

without  any  trust  expressed,  ne  will  hold  it  as  trustee 
for  the  association.  If  by  the  rules  of  the  association, 
however,  it  is  to  be  held  free  from  trust,  there  is  no 
reason  why  those  rules  should  not  be  accepted  by  the 
courts.  The  usual  presumption  of  intent  of  the  donors 
is  obviously  not  applicable.  Thus  if  the  property  of  a 
Cathohc  congregation  bought  by  its  contributions,  the 
legal  title  to  which  is  vested  in  its  Bishop  under  the 
rules  of  the  church,  is  free  from  the  control  of  the  con- 
gregation, it  is  not  properly  described  as  a  trust  fund 
held  for  the  benefit  of  the  congregation.^  So  where 
the  fund  is  raised  to  build  a  church  for  a  particular  so- 
ciety, the  fact  that  some  of  the  contributors  are  not 
members  of  the  association  does  not  in  the  absence  of 
agreement  deprive  the  association  of  its  control  of  the 
property.^"  Any  beneficiary,  however,  may  proceed 
in  equity  to  compel  the  trustee  to  execute  the  trust, 
and  so  a  member  of  an  association  as  an  individual  if 
he  can  establish  the  existence  of  a  trust  impressed  upon 
its  property  of  which  he  is  a  beneficiary,  may  sue  to 
enforce  it,^^  but  not  for  partition  of  the  property  pur- 

9  Hennessey  v.  Walsh,  55  N.  H.  515. 

Contra.  Fink  v.  Umshied,  40  Kan.  271,  19  Pac.  623;  Mannix  v. 
PurceU,  46  Ohio  St.,  102,  136,  19  N.  E.  72.  See  Heiss  v.  Vosbui-g,  59 
Wis.  532,  18  N.  W.  463. 

A  fund  raised  by  a  CathoUc  congregation  for  a  specific  object  and 
entrusted  to  the  priest  is  impressed  with  a  trust  that  the  congregation 
can  enforce.    Amish  v.  Gelhaus,  71  la.  170,  174,  32  N.  W.  318. 

10  Busby  V.  MitcheU,  23  S.  C.  472,  476. 

Contra.    Aveiy  v.  Baker,  27  Neb.  388,  397,  43  S.  W.  174. 

An  unincoi-porated  guild  formed  to  promote  the  interests  of  an  in- 
corporated church  obtained  permission  from  the  latter  to  build  an  ad- 
dition to  the  church  and  raised  money  for  it.  The  fund  was  contributed 
to  by  members  of  the  church  and  by  other  church  organizations.  Held: 
The  guild  acquu-ed  no  title  in  the  addition  which  was  on  property  of 
the  coiporation  and  could  not  control  the  disposition  of  it.  Reed  v. 
St.  Ambrose  Church,  137  Pa.  St.  320,  20  Atl.  1002. 

11  Nash  V.  Sutton,  117  N.  C.  231,  233,  23  S.  E.  198  (religious  so- 
ciety). 

At  a  pubHc  meeting  subscriptions  were  taken  for  a  church  to  be 

241 


§  60]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

chased.^-  If  there  is  more  than  one  trustee,  they  take 
as  joint  tenants,  and  there  is  survivorship  on  the  death 

used  by  all  visitors  and  others  at  a  summer  resort.  Held:  A  bill  to 
enforce  the  trust  may  be  brought  by  one  within  the  designation  of 
beneficiaries  alleging  that  the  trustees  had  allowed  it  to  be  used  ex- 
clusively for  one  denomination.  It  could  not  be  brought  merely  by  a 
contributor  to  the  charitable  trust.  Ludlam  v.  Higbee,  11  N.  J.  Eq. 
342,  3-47. 

The  session  of  a  Presbyterian  church  brought  a  bill  for  an  account- 
ing against  the  trustees  of  the  property  who  had  placed  in  the  parson- 
age a  pastor  not  approved  by  the  presbji:ery  to  which  the  church  be- 
longed. Held:  Though  the  trustees  were  by  statute  a  corporation 
holding  the  legal  title,  the  beneficiaries  were  the  members  of  the  con- 
gregation, an  unincorporated  association,  and  the  plaintiffs  as  members 
of  the  congregation  are  beneficiaries  and  entitled  to  bring  this  bill 
(p.  506).  The  session  as  such  is  merely  a  committee  of  the  congregation 
to  deal  with  spiritual  affairs  and  has  no  title  in  the  property  in  its  official 
capacity  (p.  507).  But  it  has  the  right  to  determine  what  use  of  the 
church  edifice  is  contrary  to  the  creed,  and  a  member  in  minority  has 
the  right  to  come  into  court  and  prevent  a  use  thus  determined  to  be 
improper  (p.  510).  But  here  there  was  no  breach  of  trust,  because  all 
members  of  the  congregation  acquiesced  in  the  action  of  the  trustees 
tiow  complained  of  and  so  are  estopped  (p.  519).  Everett  v.  First  Pres- 
byterian Church,  53  N.  J.  Eq.  500,  32  Atl.  747. 

Where  several  rehgious  denominations  contributed  to  the  expense 
of  building  a  church  and  keeping  it  in  repair  on  the  agreement  that  it 
was  to  be  used  by  aU  without  interfering  with  each  other,  but  that  the 
Wesleyans  were  to  have  the  preference  as  to  the  time  of  use,  the  other 
denominations  can  enforce  their  right  to  use  it  against  the  Wesleyans. 
Wilhams  v.  Church,  193  Pa.  St.  120,  44  Atl.  272. 

A  loosely  formed  committee  to  raise  money  to  erect  a  statue,  of 
which  defendant  was  a  member,  practical!}'  abandoned  its  purpose. 
The  defendant  went  ahead  on  his  own  responsibihty  and  had  the 
statue  erected,  using  for  it  some  money  he  had  raised  for  the  former 
project.  Fourteen  years  after  abandoning  the  work  two  survivors  of 
the  old  committee  met  and  i^urported  to  assign  to  plaintiff  the  money 
the  defendant  originally  collected.  Held:  Neither  the  committee  nor 
the  plaintiff  could  call  defendant  to  account.  Only  the  original  sub- 
scribers could  do  that.  Doyle  v.  Reid,  53  N.  Y.  S.  365,  33  App.  Div. 
631. 

Members  of  a  club  may  sue  in  equity  to  compel  a  retiring  treasurer 
to  turn  over  to  his  successor  a  silver  tobacco  box  belonging  to  the 
society  which  had  a  sentimental  value.  Fells  v.  Read,  3  Ves.  Jr. 
70. 

'^  An  unincorjxjrated  church  organized  an  unincorporated  asso- 
ciation which  raised  money  for  a  school  which  was  incoqiorated.  The 
:i.s.s()ciation  retained  only  the  right  to  elect  trustees.  Held:  Individual 
churches  have  no  title  in  the  jjropcrty  of  the  corporation  which  enables 
them  lo  petition  for  its  partition.  Spring  Green  Church  v.  Thornton, 
158  N.  C.  119,  122,  73  S.  E.  810. 

242 


Chap.  V]  PROPERTY  [§  60 

of  one,  but  inter  vivos  all  must  join  in  a  conveyance.^' 
The  trustees  are  the  proper  ones  to  bring  suit  to  protect 
the  trust  estate. ^^  When  trustees  are  appointed  by  the 
court  they  and  their  successors,  duly  appointed,  are 
the  proper  ones  to  carry  out  the  trust. ^^  A  surviving 
trustee  having  legal  title  may  maintain  ejectment 
against  the  agents  of  the  church. ^^  Because  only  a  legal 
title  is  subject  to  a  mechanic's  lien,  such  a  lien  could  not 
be  established  on  a  church,  title  to  which  was  vested  in 
trustees  when  the  contract  out  of  which  the  claim  arose 
was  with  the  church  society.^^  The  trustee  in  the  first 
instance  may  determine  the  use  of  the  property  held 
in  trust. ^^  Whether  he  can  convert  real  estate  into 
personalty  depends  on  the  terms  of  the  trust.^^    A  rep- 

"  Hence  all  must  join  as  plaintiffs  on  a  writ  of  entry  to  foreclose  a 
mortgage,  Webster  v.  Vandeventer,  6  Gray  428,  429,  or  to  assign  a 
mortgage,  Austin  v.  Shaw,  10  Allen  552. 

When  members  of  an  unincorporated  club  within  a  church  raise 
money  to  buy  property  for  the  church,  title  to  which  is  taken  by  a 
trustee,  but  the  church  later  declines  to  accept  it,  the  bishop  has  no 
right  to  interfere  with  a  sale  of  the  property  by  the  trustees  for  the 
club.    Eis  V.  Croze,  149  Mich.  62,  73,  112  N.  W.  943. 

A  church  cannot  claim  title  to  land  conveyed  to  its  trustees  in  con- 
sideration of  an  agreement  by  its  stewards  that  it  always  be  kept  open 
without  ratifying  the  agreement.  French  v.  Barre,  58  Vt.  567,  5  Atl. 
568. 

^*  Unangst  v.  Shortz,  5  Whart.  506,  523  (church);  Wolfe  v.  Linestone 
Council,  233  Pa.  357,  82  Atl.  499  (lodge). 

A  bond  and  mortgage  made  payable  to  "S,  Secretary  of  Baltimore 
Agricultural  Aid  Society,"  may  be  enforced  by  him  personally,  reject- 
ing the  descriptive  words.  The  legal  interest  had  vested  in  him.  Sang- 
ston  V.  Gordon,  22  Graft  (Va.)  755,  763. 

15  Crawford  v.  Nies,  220  Mass.  61. 

"  Though  they  had  managed  the  property  for  the  church  for  years, 
their  control  had  not  been  inconsistent  with  the  trust  and  therefore 
not  adverse  to  the  plaintiff.    Burrows  v.  Holt,  20  Coim.  459,  465. 

"  Peabody  v.  Eastern  Methodist  Soc,  5  Allen  540. 

18  Prickett  v.  W^ells,  117  Mo.  502,  504,  24  S.  W.  52  (choice  of  pastor). 

1^  A  devise  to  a  rehgious  society  to  build  a  meeting  house  thereon 
gives  a  fee  and  the  trustees  may  sell  and  apply  the  proceeds  to  that 
purpose.    Griffitts  v.  Cope,  17  Pa.  St.  96,  100. 

The  legislature  has  power  to  authorize  trustees  of  a  rehgious  society 
to  convert  into  personalty,  real  estate  held  in  trust  for  the  society  which 

243 


§  60]  NON-PROFIT  ASSOCIATIONS   -  [Chap.  V 

resentation  by  a  trustee  that  the  trust  estate  was  Uable 
for  his  debts  will  not  bind  the  beneficiaries.^^  The  asso- 
ciation as  such  cannot  pass  title  to  property  held  in 
trust  for  it.-^ 

Election  of  new  trustees  by  the  association  does  not 
of  itself  divest  the  title  of  the  old  trustees. -^  Transfer 
of  the  equitable  interests  of  beneficiaries  will  be  an 
equitable  defense  to  ejectment  by  the  successor  in  title 
of  the  trustee. ^^  A  lease  to  an  association  has  been  held 
binding  on  the  lessor  because  the  lessee's  officers  who 
signed  in  its  name  were  personally  bound. ^^  There  are 
numerous  decisions  that  incorporation  of  an  unincorpo- 
rated association  ipso  facto  transfers  to  the  corporation 
title  to  the  property  of  the  association.^^    The  explana- 

cannot  othem-ise  be  conveyed.  Re  Van  Home,  18  R.  I.  389,  394,  28 
Atl.  341. 

2»  Mannix  v.  PurceU,  46  Ohio  St.  102,  138,  19  N.  E.  72  (church). 

21  Austin  V.  Shaw,  10  Allen  552  (assignment  of  mortgage);  East 
Haddam  Church  v.  East  Haddam  Soc,  44  Conn.  259  (deed). 

Land  was  conveyed  to  an  EpiscopaUan  bishop  in  trust  for  the 
wardens,  vestry  and  congregation  of  a  certain  church  which  was  not 
incorporated.  Later  the  vestrymen  of  the  church  executed  a  mort- 
gage on  it.  Held:  Since  the  church  was  unincorporated  the  trustee 
was  more  than  a  passive  trustee  and  was  the  only  person  authorized 
to  execute  it.  Since  the  mortgage  was  without  his  consent,  it  was  void. 
HiU  Estate  Co.  v.  Whittlesey,  21  Wash.  142,  145,  57  Pac.  345. 

22  Mechanic's  hen  for  repairs  cannot  be  enforced  unless  the  contract 
is  enforceable  against  the  surviving  trustee.  Peabody  v.  Eastern  Metho- 
dist Soc,  5  Allen  540. 

23  Equitable  defense  pro  rata  where  only  part  of  the  equitable  in- 
terest was  acquii'cd.    Douchitt  v.  Stinson,  73  Mo.  199,  201. 

Under  a  Pennsylvania  statute  aU  property  held  in  trust  for  a  church 
shall  be  subject  to  the  control  of  the  congregation.  Held:  A  vote  of  a 
congregation  placing  title  in  the  bishop  free  from  such  control  will 
not  be  enforced.  Mazaika  v.  Krauczimas,  233  Pa.  St.  138,  153,  81  Atl. 
938;  Novicis  v.  Krauczunas,  240  Pa.  St.  248,  87  Atl.  646. 

^  Hence  there  was  consideration  for  lessor's  covenant  of  quiet  en- 
joyment.   Reding  v.  Anderson,  72  la.  498,  34  N.  W.  300. 

26  Reorganized  Church  v.  Cimrch  of  Christ,  60  Fed.  937,  941  (C.  C. 
—  Mo.)  (I)('n(!ficial  interest  in  property  h(^ld  in  trust). 

Legal  title  of  trustcM-s.  Sanchez  v.  Grace  M.  E.  Church,  114  Cal. 
295,  4f)  Pac.  2;  Hapi)y  v.  Morion,  33  111.  398,  413;  Dubs  v.  Egli,  167  111. 
514,  47  N.  E.  760;  Christian  Chun;!)  v.  Church  of  Christ,  219  111.  503, 

244 


Chap.  V]  '  PROPERTY  [§  60 

tion  has  been  made  that  this  is  the  result  of  an  act  of 
legislature  and  that  the  legislature  has  power  to  do  it,^® 
but  it  would  seem  rather  that  it  is  the  result  of  the  vol- 
untary act  of  the  association  accepting  the  act  of  incor- 
poration.^^  It  seems  clear  that  incorporation  by  a 
minority  is  insufficient  to  pass  the  title.^^  An  associa- 
tion already  in  existence  cannot  be  prevented  from 
using  its  name  by  a  corporation  later  organized  with  a 
similar  name.^^ 

76  N.  E.  703;  Baptist  Church  v.  Witherell,  3  Paige  296,  299;  Attorney 
General  v.  Dubhn,  38  N.  H.  459,  575.  Hence  the  corporation  can  re- 
cover the  funds  on  deposit  in  a  bank.  North  Church  v.  McGowan,  62 
Mo.  279,  288. 

Where  the  majority  faction  of  a  church  incorporated,  it  incorporated 
both  factions  or  the  whole  church,  and  transferred  the  church  prop- 
erty to  it.    Hohn  v.  Hohn,  81  Wis.  374,  384,  51  N.  W.  579. 

26  Reformed,  etc.  Church  v.  Mott,  7  Paige  77,  82. 

2^  Grand  Lodge  of  Illinois  sought  to  incoi-porate  and  consoKdate 
with  another  similar  one  by  special  act  of  legislature.  Held:  "The  rights 
of  the  parties  to  this  controversy  to  the  funds  and  property  in  question 
depend  upon  the  law  of  the  Order  D.  O.  H.  and  not  upon  any  act  of  the 
legislature  of  lUinois."  Alchenburger  v.  Lodge,  138  111.  App.  204,  207. 
See  query  in  Craig  v.  Inhabitants  of  Franlclin  County,  58  Me.  479,  492. 

28  Happy  V.  Morton,  33  111.  398,  413;  Hemy  v.  Deitrick,  84  Pa.  St. 
286,  294. 

23  A  lodge  of  K.  of  P.  seceded  because  it  was  forbidden  to  print 
ritual  in  German  as  before  and  formed  Improved  K.  of  P.,  incorporated. 
Plaintiff  is  Supreme  Lodge  K.  of  P.  and  is  a  corporation.  It  seeks  to 
enjoin  defendant  from  using  that  name.  Held:  Incorporation  does 
not  give  exclusive  right  to  name  already  in  use  by  an  existing  volun- 
tary society.  Rights  of  the  order  not  violated  because  no  evidence  of 
intent  to  deceive  by  use  of  similar  name  or  that  it  does  in  fact  deceive. 
K.  P.  V.  I.  K.  P.,  113  Mich.  133,  135,  71  N.  W.  470,  38  L.  R.  A.  658. 

Dissatisfied  members  of  an  unincorporated  society  cannot  by  incor- 
porating under  the  same  name  bring  bill  to  enjoin  original  society  from 
using  that  name  on  ground  that  it  deceives  the  pubhc.  Black  Rabbit 
Ass'n  V.  Munday,  21  Abb.  N.  Cas.  (N.  Y.)  99,  103. 

Injunction  allowed  in  suit  by  member  of  an  unincorporated  associa- 
tion against  a  corporation  of  same  name  to  prevent  it  from  using  that 
name.  One  of  purjjoses  of  the  association  was  to  give  dramatic  enter- 
tainments and  it  was  well  known  in  that  capacity,  and  defendant  in 
appropriating  the  name  caused  damage.  This  does  not  affect  charter 
powers.  Defendant  may  go  on  under  another  name.  Fact  that  statute 
says  corporation  shall  not  take  name  of  existing  corporation  does  not 
imply  that  plaintiff  cannot  maintain  this  suit.  Aiello  v.  MontecaKo,  21 
R.  I.  496,  44  Atl.  931. 

245 


§  60]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

A  peculiar  form  of  title  is  that  of  pew  owners  in 
churches  in  many  of  the  States.  They  are  seldom  iden- 
tical with  the  membership  in  the  association  and  seldom 
form  a  separate  association.  Their  relations  to  the 
church  are  usually  several.  They  are  not  tenants  in 
common  of  the  building,  but  have  a  usufructuary  in- 
terest in  it  which  is  ended  only  by  a  destruction  of  the 
church  which  is  inevitable  or  reasonably  necessary.^" 
Burial  rights  are  sometimes  similar.^^ 

As  a  logical  consequence  of  the  rule  regarding  title 
to  real  estate  it  is  held  that  a  devise  to  an  unincorpo- 
rated association  is  void.^^    It  is  said  that  the  associa- 

30  Jones  V.  Towne,  58  N.  H.  462;  Church  v.  Wells,  24  Pa.  St.  249, 
251;  Barnard  v.  Whipple,  29  Vt.  401;  O'Hear  v.  De  Goesbriand,  33 
Vt.  593,  606.    See  Attorney  General  v.  Federal  St.,  3  Gray  1,  45. 

A  religious  society  that  has  had  undisputed  possession  of  property 
for  forty  years  may  pass  title  to  it  in  accordance  with  its  vote.  Pew 
owners  have  only  a  right  of  occupancy  subject  to  the  superior  right  of 
the  society  owning  the  pews.  It  is  a  qualified  ownership  subject  to 
superior  title.  First  Presbyterian  Soc.  v.  Bass,  68  N.  H.  333,  337,  44 
Atl.  485. 

A  pewholder's  right  is  usufructuary  only  and  is  ended  when  the 
church  is  destroyed  by  fire.  Witthaus  v.  St.  Thomas  Church,  146 
N.  Y.  S.  279,  161  App.  Div.  208. 

A  pew  owner  holds  subject  to  the  estabUshed  usages  of  the  denomina- 
tion and  a  usage  that  deprives  him  of  all  right  in  the  proceeds  of  sale  of 
the  church  when  it  becomes  too  poor  to  further  maintain  worship  is 
binding.  It  was  assumed  that  he  knew  of  the  usage.  Huntington  v. 
Ramsden,  92  Atl.  336  (N.  H.). 

3'  Dwenger  v.  Geary,  113  Ind.  106,  121,  45  N.  E.  183;  St.  John's 
Church  V.  Hanns,  31  Pa.  St.  9. 

•^-  Greene  v.  Dennis,  6  Conn.  293,  16  Am.  Dec.  58  (yearly  meeting  of 
Quakers);  Brewster  v.  McCall,  15  Conn.  274,  294  (missionary  society); 
Marx  V.  McGlynn,  88  N.  Y.  357,  376  (Catholic  society) ;  Barker  v.  Wood, 
9  Mass.  419  (devise  to  part  of  the  members  of  a  parish). 

By  statute  a  church  society  was  made  a  cori)()rat  ion  to  the  extent  and 
for  the  j)urpose  of  taking  a  devise,  otherwise  "incapable  in  its  collective 
capacity  of  taking  any  estate  in  land."  Hamblet  v.  Bennett,  6  Allen 
140,   145. 

See  Byam  v.  Bickford,  140  Mass.  31,  32,  2  N.  E.  687,  where  a  deed 
inter  vivos  to  an  association  was  held  to  vest  title  to  the  land  in  its  mem- 
})ers  an  t(!nant3  in  common. 

A  devise  to  an  unincorporated  church  is  void  and  a  provision  for  sus- 
jjcnsion  of  the  gift  until  it  incorporates  does  not  help  it.    Washburn  v. 

246 


Chap.  V]  PROPERTY  [§  60 

tion  as  a  body  is  incapable  of  taking  and  that  it  was 
not  intended  that  the  members  should  take  as  individ- 
uals.^'^ The  next  step  was  to  hold  that  bequests  of  per- 
sonal property  to  an  association  are  void.^*  Even  where 
the  devise  or  bequest  is  to  the  association  in  trust  for 
charity  it  has  been  held  void.^^  It  has  even  been  held 
that  a  trust  for  the  benefit  of  an  unincorporated  asso- 

Acome,  131  N.  Y.  S.  963,  967,  afE'd  136  N.  Y.  S.  1150,  151  App. 
Div.  948. 

33  Greene  v.  Dennis,  6  Conn.  293,  299  (devise  to  the  "Yearly  Meet- 
ing of  the  People  called  Quakers"). 

34  State  V.  Warren,  28  Md.  338,  352;  Owens  v.  Methodist  Soc,  14 
N.  Y.  380,  385;  Re  Compton's  WiU,  131  N.  Y.  S.  183;  Riley  v.  Diggs, 
2  Dem.  Surr.  184,  189  (N.  Y.);  Ely  v.  Ely,  148  N.  Y.  S.  691,  707  (App. 
Div.);  McKeon  v.  Kearney,  57  How.  Pr.  349,  353;  Leonard  v.  Daven- 
port, 58  How.  Pr.  384,  386;  Reeves  v.  Reeves,  73  Tenn.  644,  647;  Bible 
Soc.  V.  Pendleton,  7  W.  Va.  79,  86. 

A  decision  of  the  question  was  avoided  in  Tucker  v.  Seamen's  Aid 
Soc,  7  Met.  188,  200,  because  that  will]  contained  this  clause:  "My 
wish  is,  in  all  cases  in  this  will,  where  any  sum  is  given  to  any  society  or 
voluntary  association  not  incorporated,  that  the  same  shall  go  to  the 
treasurer,  for  the  time  being,  of  such  society  or  voluntary  association, 
for  the  purposes  of  such  society  respectively,  and  that  the  receipt  of  such 
treasurer  for  the  same  shall  be  a  sufficient  discharge."  Shaw,  C.  J., 
said  that  the  treasurer  of  a  voluntary  society  was  as  capable  of  being 
identified  as  any  other  individual  and  the  trust  upon  which  he  was  to 
take  was  indicated  with  equal  certainty. 

See  an  early  case  which  held  a  bequest  in  trust  for  charity  a  vaUd 
trust  in  the  then  members.    Bartlett  v.  King,  12  Mass.  537,  540. 

While  it  seems  probable  in  Massachusetts  that  a  bequest  as  well  as  a 
devise  to  an  association  wiU  be  upheld  as  vesting  in  the  members  as  in- 
dividuals, it  will  be  wise  to  follow  the  form  considered  in  Tucker  v.  Sea- 
men's Aid  Soc,  if  only  to  spare  the  executor  the  problem  of  securing 
receipts  from  all  the  members. 

35  Philadelphia  Baptist  Ass'n  v.  Hart,  4  Wheat.  1,  28  (devise  to 
society  in  trust  for  persons  to  be  selected  by  the  society)  (statute  of 
EUzabeth  respecting  charities  was  not  in  force  in  Virginia);  Owens  v. 
Methodist  Soc,  14  N.  Y.  380,  385;  White  v.  Howard,  46  N.  Y.  144  (de- 
vise to  charitable  society  to  aid  indigent  Southern  churches) ;  Pratt  v. 
Roman  CathoMc  Orphan  Asylum,  46  N.  Y.  S.  1035,  1036,  20  App.  Div. 
352;  In  re  Waterford  Y.  M.  C.  A.,  47  N.  Y.  S.  854,  22  App.  Div.  325; 
Chih  Soc.  V.  Bowen,  21  Hun  389;  Carpenter  v.  Westchester  County  His- 
torical Soc,  2  Dem.  Surr.  574,  575  (N.  Y.);  Sherwood  v.  Am.  Bible  Soc, 
1  Keyes  561,  567  (N.  Y.)  4  App.  Div.  227,  234;  Betts  v.  Betts,  4  Abb. 
N.  C.  317,  403  (N.  Y.). 

But  see  contra,  Bartlett  v.  King,  12  Mass.  537,  540  (vesting  title  in 
members  as  individuals). 

247 


§  60]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

elation  is  unenforceable  because  the  beneficiaries  can- 
not be  ascertained.^^ 

Some  States  have  been  more  hberal."  It  has  been 
held  that  a  bequest  to  an  association  vests  in  its  mem- 
bers as  individuals,^^  and  that  since  the  association  can- 
not act  as  trustee  the  trust  will  be  enforced  by  appoint- 
ment of  another  trustee.^^  In  Vermont  an  association, 
though  unincorporated,  may  take  a  trust  for  charity.'*" 
In  Maryland,  where  the  statute  of  Elizabeth  is  not  in 
force,  an  ingenious  way  was  invented  to  get  along 
without  it.'*^    It  has  been  held  that  an  unincorporated 

3®  Downing  v.  Marshall,  23  N.  Y.  366,  382  (devise  in  trust  for  a  mis- 
sionary^ society). 

A  trust  for  the  Methodist  Episcopal  Church  of  the  United  States 
(which  is  not  incorporated)  is  too  indefinite  to  be  enforced  and  is  void, 
though  a  local  society  of  the  church  had  used  the  property  for  years. 
Little  V.  Willford,  31  Minn.  173,  17  N.  W.  282.  Ace.  Trustees  v.  Trus- 
tees, 84  Md.  173,  35  Atl.  8;  Carskadon  v.  Torreyson,  17  W.  Va.  43,  107 
(in  these  cases  the  form  of  deed  was  that  recommended  by  the  chm-ch 
discipUne) . 

^^  Held:  Property  devised  to  an  unincorporated  church  as  a  per- 
petual fund,  the  income  to  be  paid  in  a  specified  manner,  is  a  trust  which 
the  church  because  unincorporated  cannot  administer,  but  property 
given  for  immediate  expenditure  —  as  in  completing  a  church  build- 
ing —  can  be  taken  by  the  church  in  its  own  name.  There  is  no  objec- 
tion to  paying  it  to  the  person  who  ordinarily  receives  and  keeps  the 
funds  of  the  church  (p.  192).  The  other  devise  is  not  void,  but  the  heirs 
take  the  property  suljject  to  the  trust  and  it  will  be  enforced  by  a  court 
of  equity  (p.  197).  When  given  to  trustees  named  in  the  will  they  take 
title.    Johnson  v.  Mayne,  4  la.  180. 

A  New  York  bequest  to  an  unincorporated  church  in  Massachusetts 
is  valid  because  by  statute  in  Massachusetts  such  church  associations 
are  empowered  to  take  such  bequests.  Congregational  Unitarian  Soc. 
V.  Hale,  51  N.  Y.  S.  704,  707. 

A  devise  to  an  unincorporated  religious  society  in  trust  for  the  repair 
of  church  buildings  and  for  the  extension  and  promotion  of  a  certain 
faith,  is  a  donation  for  religious  purposes  and  not  a  gift  to  or  for  the  use 
of  tlic  particular  church  designated  as  trustee.  Glover  v.  Baker,  76  N.  H. 
393,  402,  S3  Atl.  910. 

'«  (Juild  V.  Allen,  28  R.  I.  4.30,  434,  67  Atl.  855. 

•■•»  (luild  V.  Alien,  28  R.  I.  430,  434,  67  Atl.  855;  HeiskeU  y.  Lodge, 
87  Tenn.  60S,  673,  11  S.  W.  825. 

"  Burr  V.  Smith,  7  Vt.  241.  At  least,  if  it  is  a  religious  society  by 
virtue  of  the  State  constitution.    Smith  v.  Nelson,  IS  Vt.  511. 

*•  A  bequest  to  a  corjioration  for  any  of  its  authorized  agencies  is 

248 


Chap.  VJ  PROPERTY  [§60 

lodge  issuing  a  benefit  certificate  may  be  designated  as 
the  beneficiary.^ 

As  to  the  title  to  personal  property  of  an  association, 
it  has  been  said  that  it  is  vested  in  the  individual  mem- 
bers,'*^ but  that  one  who  leaves  the  association  abandons 
his  interest  in  the  property  and  those  who  remain  suc- 
ceed to  it.^^    How  this  differs  from  title  in  the  associa- 

valid  though  the  beneficiary  be  an  unincorporated  association.  The 
donation  is  regarded  in  such  case  as  made  to  the  corporation,  not  in 
trust,  but  upon  condition  that  it  be  apphed  to  the  particular  corporate 
use,  unless  the  purpose  to  create  a  trust  be  clear.  Thus  it  avoids  objec- 
tion of  perpetuity  and  uncertainty. 

Though  a  gift  by  will  to  an  unincorporated  association  is  void  be- 
cause it  can  become  effective  only  by  the  aid  of  the  law,  a  gift  inter  vivos 
is  different  because  it  is  an  act  in  pais.  As  far  as  the  donor  is  concerned 
it  is  complete.  Snowden  v.  Crown  Cork  &  Seal  Co.,  114  Md.  650,  80 
Atl.  510,  512. 

^  The  assured  and  those  claiming  under  him  are  estopped  to  ques- 
tion its  capacity  to  take.  Bacon  v.  Brotherhood,  46  Minn.  303,  48  N.  W. 
1127. 

^  Trespass  for  removal  of  a  building  transferred  to  plaintiff  by  deeti 
of  a  committee  authorized  by  vote  signed  by  all  members  of  a  fire  com- 
pany.   Cm-tiss  V.  Hoyt,  19  Conn.  154,  167. 

A  conveyance  of  land  to  a  rehgious  society  before  incorporation  vested 
title  in  the  members  of  the  society  in  trust  for  the  church  and  for  the 
religious  purposes  it  represented.  Apostolic  Union  v.  Kundson,  21  Idaho 
589,  594,  123  Pac.  473. 

An  indictment  for  larceny  from  a  body  of  persons  not  incorporated 
should  be  laid  as  the  property  of  the  individuals  comprising  the  body 
and  not  of  the  company.    Wallace  v.  People,  63  111.  45i. 

Unincorporated  labor  union.  One  who  gets  assignment  pursuant  to 
vote  of  rights  from  all  members  in  good  standing  of  claims  for  misap- 
propriation of  funds  may  sue  even  if  he  has  not  assignment  from  memr 
bers  suspended  who  have  a  conditional  right  of  reinstatement.  Brown 
V.  Stoerkel,  74  Mich.  269,  276,  41  N.  W.  921,  3  L.  R.  A.  430. 

"  Then-  ownei'ship  of  property  is  of  the  same  intermediate  character. 
It  partakes  of  the  quaUties  of  both  the  others,  the  title  being  for  many 
purposes  joint  and  several  like  that  of  partners  or  joint  tenants,  while 
the  right  of  possession  is  joint  only  as  in  corporations.  Where  the 
question  of  the  right  of  present  possession  arises,  it  must  be  decided 
by  the  constitution  and  by-laws  of  the  association  or  in  the  absence  of 
any  sufficient  provision  therein  for  such  a  case,  by  the  majority." 
Liederkranz  Singing  Soc.  v.  Germania  Turn-Verein,  163  Pa.  St.  265, 
268,  29  Atl.  918. 

«  Curtiss  V.  Hoyt,  19  Conn.  154,  167. 

A  society  on  tontine  principle  issued  bonds  of  several  classes  with 
provision  for  redemption  out  of  seventy  per  cent,  of  payments  for  later 

249 


§  60]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

tion  is  hard  to  understand.  The  more  satisfactory  rule 
would  seem  to  be  that  title  is  in  the  association.  That 
is  the  law  of  associations  for  profit.  In  accordance  with 
this  view  it  has  been  held  that  title  is  in  the  associa- 
tion/^ that  when  a  group  of  members  secede  from  the 
association,  even  though  they  are  a  majority,  they  lose 
all  interest  in  its  property,^^  that  members  had  no  right 

bonds.  Theory  of  redemption  was  that  some  would  default  on  pay- 
ments and  rest  win  thereby.  Held:  Such  contracts  not  illegal,  but 
plaintiffs  cannot  bring  creditors'  bill  for  receiver  merely  alleging  they 
are  bondholders.  Does  not  appear  that  they  are  all  of  one  class.  Can- 
not be  said  from  the  bill  that  any  of  complainants  are  entitled  to  any- 
thing. "It  apphes  the  principle  of  joint  tenancy  to  the  investments 
of  the  subscribers,  the  sur\'ivorship  depending  upon  default  instead  of 
death."     Union  Invest.  Ass'n  v.  Lutz,  50  111.  App.  176. 

The  fact  that  a  local  union  withdrew  from  a  national  union  and 
affihated  with  another  was  said  to  have  no  effect  on  its  identity  aa 
affecting  property  rights.  Shipwright's  Ass'n  v.  MitcheU,  60  Wash. 
529,  111  Pac.  780. 

^  An  unincorijorated  association  can  claim  property  being  sold  on 
execution  bv  a  sheriff  as  well  as  if  it  were  incorporated.  Lavretta  v. 
Holcombe,  98  Ala.  503,  12  So.  789. 

Indiv-idual  members  of  a  church  cannot  convey  a  right  of  way  over 
its  land.  Individual  members  of  a  church  representing  it  may  enjoin 
a  trespass  on  its  property.  jMacon  Co.  v.  Riggs,  87  Ga.  158,  13  S.  E. 
312. 

A  minority  of  members  of  a  church  who  dishked  the  pastor  installed 
by  the  majority  sought  partition  of  the  property  of  the  church  as  tenants 
in  common.  Held:  The  land  was  bought  for  the  chm-ch  and  title  taken 
in  the  name  of  the  unincoiporated  association.  A  statute  saj^s  that 
"private  societies"  are  capable  of  acquiring  estates.  The  rule  of  the 
majority  prevails  on  questions  of  church  government  that  are  not 
doctrinal  and  the  minority  have  no  property  right  that  entitles  them 
to  partition.    Le  Blanc  v.  Lemaire,  105  La.  539,  5-42,  30  So.  135. 

"A  member  of  a  stock  exchange  has  merely  the  enjojTiient  and  use 
of  it  while  he  is  a  member  and  the  property  remains  with  and  belongs 
to  the  body  while  it  continues  to  exist,  hke  a  pew,  the  ultimate  and 
dominant  property  in  which  is  in  the  congregation  and  not  in  the  pew- 
holdor;  and  when  the  body  ceases  to  exist  those  who  may  then  be  mem- 
bers become  entitled  to  their  projiortionate  share  of  its  assets."  White 
V.  Brownell,  2  Daly  329,  356  (N.  Y.). 

«  McLauglilin  v.  Wall,  SI  Kan.  206,  105  Pac.  33;  Alchenburgs  v. 
L<j(lg(',  13S  111.  App.  204,  209;  Ahlendorf  v.  Barkons,  20  Ind.  App.  657, 
6.59,  50  N.  E.  887  (lodge);  McFadden  v.  Murjihy,  149  Mass.  341,  344, 
21  N.  K.  868  (lodge);  Hill  v.  Rauhan  Aarre,  200  Mass.  438,  86  N.  E. 
924  (lodge);  Schiller  Conunandery  No.  1,  U.  F.  M.  v.  Jaenniohcn,  116 
Mich.  129,  130,  74  N.  W.  458;  Moore  v.  Telephone  Co.,  171  Mich.  388, 

250 


Chap.  V]  PROPERTY  [§  60 

to  sue  for  a  dissolution  and  a  distribution  of  its  assets/'' 
that  members  of  an  unincorporated  church  entering  the 
church  building  for  other  than  religious  purposes  are 
trespassers,"*^  that  a  suit  for  restoration  of  rights  in  an 
association  cannot  be  brought  on  the  theory  that  they 
are  tenants  in  common  ^^  and  that  no  excise  was  due  on 
a  sale  of  whiskey  by  a  club  to  its  members  because  there 
was  no  transfer  of  title.^°    In  another  case  it  was  said 

399,  137  N.  W.  241  (farmers'  telephone  line)  (see  §  54,  note  11);  Man- 
ning V.  Shoemaker,  7  Pa.  Super.  Ct.  375,  382  (reUgious  society). 

Property  held  in  trust  for  a  Masonic  lodge  is  not  held  for  individual 
members  belonging  at  time  of  deed  but  for  lodge  as  an  entity.  Differs 
from  business  association.  Members  who  leave  forfeit  right  to  benefit 
of  trust.  Those  who  remain  if  the  lodge  does  not  cease  to  exist  are  en- 
titled to  the  benefit  of  the  trust.  Minor  v.  Lodge,  130  S.  W.  893,  897 
(Tex.  Civ.  App.). 

Coimecticut  lodges  which  were  set  off  from  the  jurisdiction  of  the 
Massachusetts  Grand  Lodge  under  a  Connecticut  Grand  Lodge  were 
not  seceders  because  they  took  no  voluntary  action,  so  they  did  not 
lose  their  interest  in  the  funds  of  the  Massachusetts  Grand  Lodge. 
A.  O.  U.  W.  V.  A.  O.  U.  W.,  81  Conn.  189,  208,  70  Atl.  617. 

*7  Robertson  v.  Walker,  3  Baxt.  (Tenn.)  316,  318;  Thomas  v.  EU- 
maker,  1  Pars.  Eq.  Cas.  98,  111  (Pa.). 

48  Unangst  v.  Shortz,  5  Wliart.  506,  520. 

In  a  church  controversy,  injunction  is  a  proper  remedy  to  prevent 
unlawful  use  of  the  church  property  by  a  faction  of  the  congregation. 
Richter  v.  Rabat,  114  Mich.  575,  579,  72  N.  W.  600. 

A  bill  in  equity  by  one  faction  of  a  church  to  enjoin  another  from 
using  the  church  because  the  minister  who  preached  to  them  was  not 
duly  elected  was  dismissed  for  want  of  jmusdiction.  Smith  v.  Charles, 
24  So.  968  (Miss.). 

The  losing  party  in  a  controversy  over  possession  of  church  prop- 
erty was  held  not  in  equity  chargeable  personally  for  the  value  of  the 
use  and  occupation  of  the  chiu-ch  property  during  the  time  they  were 
litigating  to  keep  control  of  the  society  and  its  affairs.  Bouldin  v. 
Alexander,  103  U.  S.  330,  335,  26  L.  ed.  308. 

*3  Property  was  given  in  trust  for  two  congregations.  The  two 
united  and  used  it  as  one.  Later  one  of  the  original  societies  took  pos- 
session of  the  church  and  excluded  the  other.  A  bill  in  equity  for 
restoration  to  rights  was  brought  on  the  theory  that  the  plaintiffs  were 
tenants  in  common.  Held:  The  bill  discloses  that  they  are  members 
of  an  association  and  not  tenants  in  common.  Hence  their  rights  can 
be  adjusted  only  in  equity.  "By  reason  of  numbers  and  the  character 
of  the  rights  of  the  parties  damages  are  unsuitable  as  a  means  of  re- 
dress." Kisor's  Appeal,  62  Pa.  St.  428,  434. 

50  Graff  V.  Evans,  8  Q.  B.  D.  373. 

251 


§  60]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

that  a  fund  raised  by  a  fair  and  by  contribution  of  mem- 
bers for  a  public  purpose  belonged  to  the  association 
and  was  not  impressed  with  a  trust  which  the  contribu- 
tors could  enforce. ^^  The  funds  in  the  treasury  cannot 
be  distributed  among  the  members  without  unanimous 
consent.^^  The  issue  has  been  raised  in  cases  relating  to 
the  sale  of  liquor  by  clubs  to  members  and  the  decisions 
-are  conflicting.^^ 

Though  in  most  associations  not  organized  for  profit 
the  property  rights  are  unimportant,  in  cases  arising 
out  of  the  failure  of  the  communistic  experiments  that 
have  been  tried  in  various  places,  the  issues  have  in- 
volved substantial  amounts.  The  cardinal  feature  of 
these  societies  is  that  the  members  contribute  their 
labor  and  its  products  to  the  common  fund  in  return 
for  the  obligation  of  support,  but  have  no  individual 
right  in  the  fund.  These  agreements  are  legal  and  it 
follows  that  when  a  member  voluntarily  withdraws  he 
forfeits  all  claim  on  the  property  of  the  association.^* 

"  Parker  v.  OUver,  198  Mass.  488,  84  N.  E.  860. 

"There  is  no  law  in  Louisiana  wliich  prevents  an  association  of  in- 
dividuals from  acquiring  property  and  holding  it  in  common  for  their 
mutual  benefit.  And  there  is  no  law  which  prevents  them  from  sell- 
ing the  same."  Michenor  v.  Reinach,  49  La.  Ann.  360,  362,  21  So. 
552. 

52  Kalbitzer  v.  Goodhue,  52  W.  Va.  435,  440,  44  S.  E.  264  (butcher's 
protective  association) . 

"  A  sale  of  Uquor  in  a  club  was  not  meant  to  come  within  the  scope 
of  the  Licensing  Acts.  It  was  not  a  sale  "at  retail."  The  members 
who  bought  were  also  vendors  as  to  their  own  shares.  They  could  not 
have  been  sued  for  goods  sold  and  delivered  for  the  price.  The  general 
property  in  the  goods  was  in  tlu^  club.  A  "special"  property  was  in 
trustees  under  certain  rules.  Other  officers  of  the  club  had  other 
"special"  proptTties.    Graff  v.  Evans,  8  Q.  B.  D.  373. 

Delivery  by  a  club  through  its  agents  of  beer  which  was  its  common 
property  to  a  member  on  credit  or  for  cash  which  thereby  became  his 
separate  property  is  a  sale.    Marmont  v.  State,  48  Ind.  21. 

"  A  m(!rnber  of  a  communistic  religious  society  who  had  withdrawn 
brought  imkbUalus  aanuinpail.  lie  had  contributed  his  jiroperty  to 
the  society  and  was  to  b(!  supported  by  it.  \\v  did  not  get  all  the  sup- 
])u\-\  he  cxjM'ctcd  and  the  funds  were  used  to  feed  strangers  and  new 


Chap.  V]  PROPERTY  [§  60 

The  most  recent  case  recognizes  expressly  that  title  to 
the  common  property  is  in  the  association,^^  but  the 

converts  and  all  did  not  work  equally  hard  to  replenish  the  common 
stock.  Held:  No  right  of  action.  The  society  was  not  illegal.  Ruse 
V.  Williams,  14  Ariz.  445,  130  Pac.  887. 

Bill  by  seceding  Shakers  for  partition  of  property.  Held:  Bound 
by  their  covenants.  The  trust  was  vaUd  since  for  a  charity  and  not  a 
perpetuity  under  the  statute  of  EMzabeth.  Gass  v.  Wilhite,  2  Dana 
(Ky.)  170,  172,  178. 

A  Shaker  who  subscribed  to  their  agreement  for  community  prop- 
erty and  that  no  one  withdrawing  should  have  any  claim  against  the 
society,  withdrew  and  sued  for  fair  value  of  his  twelve  years'  services. 
Held:  The  agreement  is  vaUd  and  was  knowingly  signed  by  the  plain- 
tiff and  he  cannot  recover.  If  it  were  invaUd,  he  was  party  to  illegal- 
ity and  so  cannot  recover.  Waite  v.  Merrill,  4  Greenleaf  102,  117 
(Me.). 

A  member  who  sought  to  recover  for  the  value  of  his  labor  was  held 
bound  by  laches,  where  he  had  waited  fifty  years  after  retiring  from  the 
society  before  suing.  Speidell  v.  Henrici,  15  Fed.  753,  120  U.  S.  377, 
30  L.  ed.  718,  7  S.  Ct.  610. 

A  child  who  gi'ew  up  in  a  communistic  society  at  Zion  on  becoming 
of  age  signed  articles  which  provided  for  community  ownership  and  only 
right  to  support  by  members  while  Uving  with  the  society.  Also  pro- 
vided power  of  expulsion  on  certain  terms.  Plaintiff's  husband  was 
expelled  and  she  followed  him.  She  now  prays  for  partition  of  her  share 
in  the  common  property.  Held:  The  agi'eement  was  valid  and  bound 
her.  She  has  received  the  consideration  for  her  labor  and  if  it  were  in- 
valid, she  as  a  newcomer  could  not  claim  title  to  the  original  fund  which 
must  revert  to  donors.  Did  not  pass  on  question  of  forfeiture,  etc. 
Gaselys  v.  Separatist  Soc,  13  Ohio  St.  144,  154. 

For  a  case  relating  to  the  right  to  exclude  a  member  from  the  society, 
see  Nachtrieb  v.  Harmony  Settlement,  Fed.  Cas.  No.  10003;  Baker  v. 
Nachtrieb,  19  Howard  126. 

*^  A  sociaUstic  community  with  valuable  land  had  been  reduced  to  a 
few  members  by  withdrawals.  The  eight  remaining  were  about  to  con- 
vey the  property  to  a  corporation.  Descendants  of  original  contribu- 
tors brought  a  bill  claiming  right  in  it  by  resulting  trust.  Held 
(majority  of  court) :  The  agi'eements  show  a  contribution  of  the  prop- 
erty to  the  society  as  a  society  which  has  not  yet  been  divided  by 
common  consent  of  members  or  by  abandonment  of  purpose  for  which 
formed.  Those  who  withdraw  from  the  society  have  no  rights  which 
are  transmissible  or  enforceable  on  dissolution  of  the  society.  Schwartz 
V.  Duss,  187  U.  S.  8,  24,  47  L.  ed.  53,  23  S.  Ct.  4,  103  F.  561,  43  C.  C.  A. 
323. 

Descendants  of  the  original  founder  of  the  society  claimed  title  to 
the  property  because  the  purposes  of  the  society  were  impossible.  The 
court  affirmed  the  title  by  survivorship  in  the  remaining  members. 
Everett  v.  Duss,  206  Fed.  590,  608  (C.  C.  A.  —  Pa.). 

Bill  in  equity  for  an  account  and  partition  of  real  and  personal  estate 
of  a  religious  and  sociahstic  community  by  an  heir  of  a  member  who 

253 


§  61]  NON-PROFIT  ASSOCIATIONS  [Ch.^.  V 

New  York  court  has  held  that  title  is  in  the  continuing 
members  as  joint  tenants. ^^  The  agreement  is  not  a 
perpetuity.^' 

It  should  be  noted  that  the  Uniform  Partnership 
Act  recommended  by  the  Commissioners  on  Uniform 
State  Laws  in  1914  does  not  apply  to  non-profit  asso- 
ciations and  so  "^"ill  not  reconcile  the  conflicting  deci- 
sions as  to  the  property  of  such  associations. 

§  61.  Property  of  Religious  Associations 

The  htigation  that  has  followed  the  bitter  quarrels 
that  so  often  degrade  rehgious  organizations  usually 

died  before  the  society  was  incorporated  against  the  founder  and  head 
of  the  society.  Members  on  joining  signed  the  constitution,  which  pro- 
vided for  common  ownership  of  all  property.  Held:  There  was  no  indi- 
vidual ownership  in  the  property  of  the  association.  Goesele  v.  Bimeler, 
14  How.  5S9. 

^  Plaintiff  was  member  of  socialistic  community  carrying  on  a  can- 
ning business  for  which  he  was  salesman.  The  covenant  he  had  signed 
on  coming  of  age  required  that  if  he  Hved  outside  the  community  he 
should  turn  over  to  it  all  his  earnings,  that  any  member  could  retire  at 
any  time,  but  thereby  forfeited  all  right  in  the  propertj*  of  the  society. 
Plaintiff  disagreeing  with  pohc^-  of  society'  went  to  work  for  rival  can- 
nen,'  but  declared  that  he  retained  his  membership  and  right  to  retvun 
when  he  chose  and  that  if  he  did  so  he  would  bring  aU  his  earnings  with 
him,  but  that  in  meantime  he  would  retain  them.  Later  all  business 
carried  on  by  the  society-  was  turned  over  to  a  corporation  in  which 
members  took  stock.  Society  not  formally  dissolved.  Members  had 
voted  that  plaintiff  had  voluntarily  withdrawn.  Held:  Plaintiff  had 
voluntarily  left  the  societj-  and  ceased  to  be  a  member,  hence  he  has  no 
right  in  the  property  or  to  claim  that  there  has  been  a  dissolution.  His 
disclaimer  of  ^\nthdrawal  is  insufficient,  for  his  work  for  a  rival  business 
was  inconsistent  with  membership.  The  agreement  regarding  property 
was  not  illegal.  "It  was  a  joint  holding  of  property  by  the  adult  mem- 
bers of  the  conununity  with  this  quahfication,  that  upon  the  death  or 
withdrawal  of  a  member  no  share  or  interest  therein  passed  to  him  or 
his  personal  representatives,  but  they  who  survived  or  remained  con- 
tinued to  hold  jointly  the  entire  property  in  solidum."  "By  the  terms 
of  the  contract  under  which  that  estate  was  acquired,  its  duration  was 
only  co-existent  with  the  duration  of  his  membership."  (The  title  to 
real  estate  had  been  held  bv  trustees.)  Burt  v.  Oneida  Communitv,  137 
N.  Y.  346,  Soo,  33  N.  E.  .307,  .50  N.  Y.  St.  722,  19  L.  R.  A.  297,  aff'd 
138  N.  Y.  6-19,  .34  X.  E.  288,  .53  N.  Y.  St.  24. 

"  Goesele  v.  Bimeler,  14  How.  .589,  608. 

2.54 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

has  been  concerned  fundamentally  with  questions  not 
peculiar  to  the  law  of  unincorporated  associations,  but 
rather  with  applications  of  the  law  of  trusts.  Since  reli- 
gious organizations  are  usually  unincorporated,  and 
since  the  most  important  decisions  on  the  subject  have 
arisen  out  of  schisms  in  unincorporated  churches,  it 
seems  desirable  to  state  the  results  of  those  decisions 
here  and  show  their  relation  to  the  general  law  of  non- 
profit associations. 

To  understand  these  cases  it  is  essential  to  recall  at 
the  start  certain  fundamental  principles  which  have 
influenced  the  courts  in  their  decisions. 

(a)  Courts  will  not  interfere  in  the  internal  affairs 
of  unincorporated  associations  unless  property  rights  are 
involved.^ 

(6)  Civil  courts  are  not  equipped  to  decide  ecclesi- 
astical questions.^ 

(c)  Courts  when  forced  to  pass  upon  the  internal 
affairs  of  associations  are  bound  by  decisions  of  a  tri- 
bunal constituted  by  the  laws  of  the  association  when 
within  its  jurisdiction,  because  in  joining  an  unincor- 
porated association  a  member  agrees  to  submit  to  those 
laws.^ 

(d)  Other  things  being  equal,  the  majority  rules  in 
unincorporated  associations.'* 

(e)  When  membership  in  an  association  ceases, 
whether  by  proper  expulsion  or  voluntary  withdrawal, 
all  rights  of  the  member  in  its  property  cease.^ 

^  See  §  58  and  §  56,  notes  19  et  seq. 

2  Moseman  v.  Heitzhusen,  50  Neb.  420,  423,  69  N.  W.  957  (vote  by 
majority  to  change  church  affihation.  Dispute  of  factions  over  church 
property). 

^  See  §  56,  notes  14  et  seq.;   §  58,  notes  4  et  seq. 

*  See  §  58,  note  12. 

^  See  §  60,  notes  44  et  seq. 

255 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

(/)  Equity  will  enforce  a  trust  on  petition  of  one 
entitled  to  enforcement  regardless  of  the  opposition  of 
trustees  or  beneficiaries.^ 

{g)  Funds  accumulated  by  subscription  for  a  specific 
purpose  are  held  in  trust  by  the  recipient  for  that 
purpose.^ 

{h)  The  majority  of  an  association  cannot  without 
unanimous  consent  authorize  acts  outside  the  scope  of 
the  purposes  for  which  it  was  originally  organized.^ 

In  the  application  of  these  principles  to  the  issues  in 
religious  litigation  courts  inevitably  have  been  influ- 
enced by  their  conception  of  the  fundamental  import- 
ance of  doctrinal  differences,  though  always  vigorously 
protesting  that  they  will  not  pass  upon  such  questions. 
Thus  when  forced  to  deal  with  property  rights  involved 
in  the  laudable  attempts  of  warring  sects  to  unite  and 
harmonize  those  differences  in  theology  which  our 
fathers  claimed  to  understand,  but  which  to  the  modern 
lay  mind  seem  not  worth  understanding,  some  judges 
have  conceived  that  where  property  is  acquired  without 
any  express  trust  attached  there  is  an  implied  trust  that 
it  be  used  only  for  the  promotion  of  the  rehgion  pro- 
fessed by  the  congregation  at  the  time  of  its  acquisi- 
tion. Others  have  felt  that  these  doctrinal  differ- 
ences necessitated  an  application  of  the  doctrine  of 
ultra  vires.  Others  have  been  glad  to  accept  the  de- 
cisions of  the  church  itself  as  sufficient  justification 
for  the  acts  complained  of. 

Religious  organizations  are  of  two  sorts,  the  congre- 
gational system,  in  which  each  church  is  practically 
independent,  and  the  connectional  system,  in  which 
each  local  church  is  subordinate  to  higher  organizations, 

6  Hoc  §  GO,  note  11.  '  Soo  §  00,  note  8.  »  See  §  59. 

256 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

usually  culminating,  in  the  United  States,  in  a  national 
body.  The  Supreme  Court  of  the  United  States  has 
laid  down  the  rules  which  it  would  seem  should  be  ap- 
plied in  litigation  between  factions  in  an  unincorpo- 
rated church,  each  seeking  control  of  its  material  assets. 

When  property  is  given  expressly  in  trust  to  support 
some  particular  doctrine,  the  congregation  cannot  by 
a  change  of  views  carry  the  property  to  the  support  of 
the  new  doctrine. 

Where  property  is  held  by  an  independent  church 
with  no  trust  expressed  except  that  it  is  for  the  use  of  the 
society,  if  there  is  a  schism,  the  rights  in  the  property 
must  be  determined,  as  in  all  associations.  If  their 
principle  of  government  is  the  rule  of  the  majority, 
then  the  numerical  majority  must  control  the  property. 
If  there  are  officers  in  whom  are  vested  the  power  of 
control,  then  those  who  adhere  to  the  acknowledged 
organism  by  which  the  body  is  governed  are  entitled  to 
the  use  of  the  property.  The  minority  choosing  to 
separately  organize  can  claim  no  rights.  Where  prop- 
erty is  acquired  in  any  of  the  usual  modes  for  the  gen- 
eral use  of  a  church  which  is  itself  part  of  a  general  or- 
ganization of  some  religious  denomination,  so  long  as 
any  existing  rehgious  congregation  can  be  ascertained 
to  be  that  congregation  or  its  successor,  it  is  entitled 
to  the  property.  When  this  question  has  been  decided 
by  the  highest  tribunal  in  the  church  legal  tribunals 
must  accept  that  decision.^ 

9  Watson  V.  Jones,  13  Wall.  679,  723,  726. 

Dictum  in  case  of  corporation  that  whether  uncorporated  or  not, 
property  conveyed  to  it  for  the  support  of  a  particular  doctrine  is  held 
as  a  trust  for  that  purpose  which  equity  wiU  enforce.  When  endowed 
as  belonging  to  a  particular  sect  or  connection,  it  cannot  break  off  from 
that.  When  not  so  described,  it  may  change  its  relation  provided  there 
be  no  radical  departure  from  the  original  faith.     The  property  belongs 

257 


§  61]  XOX-PROFIT   .\SSOCL\TIONS  [Chap.  V 

Trusts  that  are  clearly  expressed  seldom  trouble  the 
courts. ^°  Perhaps  for  tliis  reason  cases  invohing  ex- 
press trusts  for  the  support  of  a  particular  doctrine  are 
few.  There  are  cases  of  gifts  to  a  church  described  as 
affiUated  ^ith  a  specific  organization  where  the  niinorit  j^ 
adhering  to  that  affiliation  was  held  entitled  to  control 
its  property.^^  Trusts  to  permit  preachers  of  a  specific 
denomination  ^-  or  certain  members  of  a  specified  de- 
nomination^^ to  use  it  and  trusts  for  a  congregation  in  a 

to  those  who  act  in  accordance  with  the  law  of  the  church,  though  a 
minoritv.  Schnorr's  Appeal.  67  Pa.  St.  1.3S,  146.  Ace.  Roschi's  Appeal, 
69  Pa.  St.  462,  468;  Ramsey's  Appeal  88  Pa.  St.  60,  63. 

10  Xance  v.  Busby,  91  Tenn.  303,  313,  18  S.  W.  874.  (Dic- 
tiun  of  Lurton,  J.,  in  support  of  first  proposition  of  Watson  t'. 
Jones.) 

If  a  gift  is  to  be  made  in  trust  to  propagate  any  particular  doc- 
trine of  Christianity  it  must  be  clearly  declared.  Attorney  General  r. 
Federal  St.  3  Gray  1,  58.  See  Xance  v.  Busby,  91  Tenn.  303,  313, 
18  S.  W.  874. 

"  A  conyeyance  was  made  to  trustees  for  the  use  of  the  congregation 
of  Methodist  Protestants.  Later  the  denomination  tried  to  unite  with 
the  Methodist  Episcopal  Church  South.  A  majority  of  the  congrega- 
tion voted  to  join  the  latter  and  claimed  the  property  as  against  a 
minoritj'  adhering  to  the  old  congregation.  Held:  The  majority 
are  not  beneficiaries  of  the  trust  because  not  belonging  to  the 
Methodist  Protestant  church.  A  statute  attempting  to  authorize 
the  majority  to  take  oyer  the  church  property  is  imconstitutional 
so  far  as  it  attempts  to  affect  said  trust.  Firdey  r.  Brent,  87  Va.  103, 
108,  12  S.  E.  228. 

Upon  a  division  in  a  Lutheran  church  that  had  been  attached  to 
H.  SjTiod,  complainants  had  yoluntarily  withdrawn  and  attached 
themselves  to  M.  SjTiod.  Held:  Though  a  majority,  they  cannot  claim 
to  control  property  convej'ed  to  the  elders  "for  use  as  a  church  and  con- 
trolled by  the  Evangelical  Lutheran  Church  of  the  Holston  Sj-nod" 
(p.  183).  A  sjTiod  having  once  decided  in  favor  of  one  faction,  its  e.xec- 
utive  committee  had  no  authority  to  change  that  decision  (p.  190). 
Rodgers  i-.  Bennett,  108  Tenn.  173,  65  S.  W.  408. 

"  Feizil  I'.  Trustees  of  German  ^L  E.  Society,  9  Kan.  594.  597 
(rule  that  only  in  matters  relating  to  the  temporahties  of  a  church  can 
courts  interfere  was  affirmed.     Brewer,  J.,  allowed  mandamus). 

"  A  deefi  gave  Land  to  the  Methodist  Episcopal  Church  South  for 
the  use  of  its  colorcil  members.  Many  of  them  separated  and  organized 
the  African  Methodist  Church.  They  were  allowed  to  use  the  church 
for  a  time,  but  now  a  grouj)  of  colored  members  of  the  former  church 
sue  for  pos-session.  Held:  The  trust  must  be  enforced  for  the  benefit 
of  the  jjctitioners.     Brown  v.  Moore,  80  Ky.  443. 

258 


Chap.  V]  RELIGIOUS   ASSOCIATIONS  [§61 

specified  locality  ^'*  have  been  enforced  against  the  will 
of  a  majority  of  the  congregation. 

The  second  proposition  of  Watson  v.  Jones,  though, 
it  is  submitted,  more  consonant  with  sound  reasoning, 
has  not  been  generally  accepted.  The  courts  have  re- 
peatedly laid  down  the  general  rule  that  in  congrega- 
tional churches  the  will  of  the  majority  governs,^^  but 
when  they  have  had  to  decide  which  of  two  factions  in 
such  a  church  is  entitled  to  its  property,  most  of  the 
courts  have  implied  a  trust  for  the  support  of  the  par- 
ticular doctrine  professed  by  the  congregation  at  the 
time  of  its  acquisition  and  have  tried  to  determine  which 
faction  adhered   to  that  doctrine. ^^     In  one  case  the 

^*  A  trustee  of  funds  raised  to  support  a  church  in  a  certain  locality 
cannot  use  the  funds  for  support  of  another  church  at  a  distance  from  it 
no  matter  how  many  of  the  congi-egation  chose  to  move  to  the  latter 
place.  The  original  church  having  become  incorporated  can  sue 
for  an  accounting.  Presbyterian  Church  v.  Donnom,  1  Dess.  154 
(S.  C). 

A  gift  to  trustees  for  a  certain  reUgious  society  so  long  as  it  held  a 
certain  faith  "and  such  as  may  succeed  them  forever  holding  the  same 
principles"  is  not  terminated  when  the  original  society  changes  its 
views  and  moves  away,  but  the  trust  subsists  for  the  benefit  of  any 
other  society  that  may  be  formed  holding  the  specified  views.  Potter 
V.  Thornton,  7  R.  I.  252,  264.  See  also  Goode  v.  McPherson,  51  Mo. 
126. 

16  See  §  58,  note  12. 

18  White  Lick,  etc.  Friends  v.  White  Lick,  etc.  Friends,  89  Ind.  136; 
Hendrickson  v.  Shotwell,  1  N.  J.  Eq.  577,  645;  True  Reformed  Church 
V.  Iserman,  64  N.  J.  L.  506,  43  Atl.  771;  App  v.  Lutheran,  6  Pa.  St.  201, 
210;  Trustees  v.  Sturgeon,  9  Pa.  St.  321,  331.  This  same  doctrine, 
being  one  of  trusts,  seems  to  apply  equally  to  incorporated  churches. 
Bose  V.  Christ,  193  Pa.  St.  13,  44  Atl.  240;  Cape  v.  Plymouth  Church, 
130  Wis.  174,  180,  109  N.  W.  928;  Peace  v.  Christian  Church,  20  Tex. 
Civ.  App.  85,  91,  48  S.  W.  534. 

A  majority  of  a  Baptist  church  expelled  a  minority.  The  dispute 
was  over  a  technical  question  of  theology.  The  church  belonged  to 
an  association  of  churches.  Both  parties  appealed  to  it  and  the  minor- 
ity was  recognized.  This  decision  was  advisory  only  as  the  churches 
were  congregational  and  independent.  A  dispute  over  the  right  to 
possess  the  church  property  brought  the  issue  to  court.  The  court 
below  held  that  the  church  had  always  adhered  to  the  doctrine  now 
followed  by  the  majority  and  that  the  majority  were  therefore  entitled 
to  the  property.     On  appeal,  Held:    The  property  of  a  reUgious  con- 

259 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

suit  was  held  barred  by  laches. ^^  In  another  the  court 
refused  to  interfere  with  the  decision  of  the  church  it- 
self.^^  Where  doctrinal  questions  were  not  involved  the 
decision  of  the  majority  was  sustained.^^    Many  cases 

gregation  is  dedicated  to  the  original  doctrine  of  that  congregation 
and  not  even  a  majoritj'  can  carry  it  over  to  a  new  doctrine  (p.  378). 
"As  well  might  it  be  contended  that  a  banking  corporation  or  associa- 
tion by  a  majority  vote  of  its  stockholders  or  directors  could  change 
its  business  from  banking  to  insmance  business  or  into  that  of  a  rail- 
road company  against  the  protest  of  a  minority"  (p.  379).  It  is  only 
to  decide  property  questions  that  courts  consider  issues  of  doctrine 
(p.  364).  The  decision  of  the  Baptist  Association  on  a  question  of 
doctrine,  though  advisorj-  and  not  judicatorA',  must  have  a  controUing 
influence  in  ci\'Ll  courts  (p.  383).  The  majority  doctrine  was  a  departure 
from  the  original  doctrine  of  the  chm"ch  as  set  forth  in  the  original  con- 
fession of  faith  and  rules  of  decorum  and  the  minority  are  entitled  to 
the  property.  On  a  motion  for  rehearing  the  decision  was  reafiirmed. 
\Miile  majority  rules  on  minor  questions  of  discipline,  it  does  not  on 
fundamental  questions  of  doctrine  (p.  395).  '\Miile  no  judicial  inquiry 
can  be  made  as  to  the  expulsion  of  members  by  a  church  so  long  as  it 
is  done  according  to  the  law  of  the  church,  the  question  here  is,  who 
are  the  church  (p.  407).  Dissent  by  one  on  the  ground  that  there  was 
some  evidence  to  sustain  the  finding  of  the  coint  below.  Smith  v. 
Pedigo,  145  Ind.  361,  33  X.  E.  777. 

In  Bouldin  v.  Alexander,  15  Wall.  131,  140,  the  com-t  said:  "In  a 
congregational  church,  the  majority  if  they  adhere  to  the  organization 
and  to  the  doctrines  represent  the  church." 

An  unincorporated  congregation  may  bring  a  bill  in  equity  against 
the  church  corporation  to  enjoin  diversion  of  the  church  property  to  a 
different  faith.  ^larien  v.  Evangehcal  Congregation,  140  Wis.  31,  121 
N.  W.  604. 

1'  Predestinarian  Church  v.  United  Church,  139  Ky.  110,  129  S.  W. 
546  (nineteen  years'  delajO- 

1*  Courts  will  not  interfere  with  the  decision  of  a  Baptist  church 
having  congregational  organization  as  to  the  use  of  the  church  by  two 
factions.  Windham  v.  Uhner,  102  Miss.  491,  59  So.  810.  See'Ood- 
mundson  v.  Thingvalla  Church,  150  N.  W.  750  (N.  D.). 

1*  Hubbard  v.  German  CathoUc  Soc,  34  la.  31,  35  (trust  fund, 
raised  for  a  parsonage,  applied  to  debts). 

A  schism  in  a  church  on  doctrinal  points  resulted  in  the  expulsion 
of  a  minority  by  the  majority  and  the  organization  of  the  minority, 
who  claimed  possession  of  the  church  property  as  representing  the 
original  doctrines  accepted  by  the  church  at  the  time  the  property  was 
acquired.  Held:  Botii  doctrines  seem  to  be  accepted  by  different 
churches  of  the  denomination,  so  that  it  cannot  be  said  that  the  major- 
ity by  its  change  of  belief  has  departed  from  the  true  doctrine  and 
therefore  no  breach  of  trust  has  occurred  (p.  520).  The  church  is  an 
independent  congregation  and  therefore  the  majority  rules  and  those 
excluded  by  vote  of  the  church  have  lost  all  interest  in  the  property  as 

200 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

have  been  disposed  of  by  the  settled  rule  that  those 
whose  membership  in  the  association  has  been  duly 
terminated  have  no  rights  in  its  property.  Hence 
when  one  faction  in  a  schism  has  seceded  from  the  origi- 
nal church  association  and  organized  a  distinct  asso- 
ciation not  purporting  to  be  the  original  church,  the 
control  of  the  church  property  has  been  awarded  to 
those  who  could  prove  the  identity  of  their  organiza- 
tion with  the  original  association.^"  Even  where  the 
seceders  had  been  allowed  for  years  to  share  the  prop- 
erty it  has  been  held  that  their  rights  were  permissive 
only.2^    This  rule  is  equally  applicable  to  connectional 

beneficiaries.  The  court  must  accept  the  exclusion  as  vaUd  (p.  522). 
Bennett  v.  Morgan,  112  Ky.  512,  66  S.  W.  287. 

A  majority  of  a  Baptist  church  may  vote  to  move  to  another  town 
and  take  with  them  all  its  property  except  property  charged  with  a 
trust  for  its  use  at  the  original  site,  such  as  property  raised  by  pubhc 
contributions  of  the  citizens  of  the  town.  A  majority  having  dissolved 
the  original  church  organization  by  the  vote  to  remove,  the  minority 
have  no  right  to  bring  an  action  at  law  with  respect  to  such  property. 
McRoberts  v.  Moudy,  19  Mo.  App.  26,  34. 

2"  This  is  the  ultimate  ground  of  decision  in  Watson  v.  Jones,  13 
Wall.  679,  734.  Ace.  Mack  v.  Krine,  129  Ga.  1,  23,  58  S.  E.  184;  Hadden 
V.  Chorn,  47  Ky.  70,  77;  Lewis  v.  Watson,  67  Ky.  228;  Fuchs  v.  Meisel, 
102  Mich.  357,  373,  60  N.  W.  773  (majority  seceded) ;  Trustees  v.  Sea- 
ford,  16  N.  C.  453,  455;  Holt  v.  Downs,  58  N.  H.  170,  181. 

Trustees  may  bring  ejectment  at  law  against  a  portion  of  the  con- 
gregation who  have  formed  a  separate  organization  and  taken  posses- 
sion of  the  property.  Fernstler  v.  Siebert,  114  Pa.  St.  196,  204,  6  Atl. 
165. 

Unless  church  factions  so  divide  that  each  claims  to  be  the  original 
church,  the  courts  will  not  interfere  with  disputes  in  congi'egational 
churches.     Stogner  v.  Laird,  145  S.  W.  644  (Tex.). 

2^  Seceding  members  of  a  church  formed  with  others  a  new  congre- 
gation. The  new  church  was  allowed  by  the  old  to  use  the  church 
building  part  of  the  time  for  ten  or  fifteen  years.  Then  it  was  refused 
and  the  old  church  brought  a  biU  in  equity  to  compel  the  new  church 
to  desist  from  using  the  building.  Held :  The  new  church  had  no  con- 
tract right  and  the  injunction  should  be  granted.  CahiU  v.  Bigger,  47 
Ky.  211,  214. 

Where  seceders  had  been  allowed  for  twenty-nine  years  to  use  alter- 
nately the  old  church  edifice,  their  rights  were  permissive  only  and 
title  remained  in  the  original  church,  which  is  identified  by  its  adher- 
ence to  the  original  doctrines.    Hence  the  new  church  could  not  restrain 

261 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

churches. 2-  In  Kentucky,  where  this  Utigation  has  been 
most  prolific,  the  rule  has  been  applied  in  cases  of  expul- 
sion of  a  minority  by  a  majority,  and  at  the  same  time 
the  court  held  that  the  action  of  the  majority  must  be 
accepted  by  the  courts  as  conclusive  that  those  ex- 
pelled were  no  longer  members.^^  Since  expulsion  is 
usually  resorted  to  in  these  controversies,  this  reaUy 
begs  the  question,  and,  in  its  reasoning,  this  case  is  not 
likely  to  be  followed.  It  has,  however,  been  approved 
by  the  Supreme  Court  of  the  United  States  ^^  and  the 
result  seems  in  accord  ^vith  the  doctrine  of  Watson  v. 
Jones.  By  statute  in  Kentucky  some  of  these  cases 
have  been  disposed  of  sensibly  by  decrees  providing 
for  joint  use  of  the  church  edifice  where  neither  faction 
separately  organized. ^^ 

The  third  proposition  of  Watson  v.  Jones  is  that  the 
property  of  a  church  which  is  itself  part  of  a  superior 
church  organization  is  to  be  controlled  by  the  organiza- 
tion which  can  be  identified  as  the  same  branch  of  the 
parent  organization  and  that  the  decision  on  this  point 

the  old  church  from  tearing  dovm  and  replacing  the  church  edifice. 
Appeal  of  Landis,  102  Pa.  St.  467,  473. 

22  Godfrey  v.  Walker,  42  Ga.  562,  571. 

If  the  original  congregation  is  kept  up  even  by  a  minority  they  cannot 
be  divested  of  the  property  by  a  separate  organization  of  seceders. 
Harper  v.  Straws,  53  Ky.  48,  55;  McKinney  v.  Griggs,  68  Ky.  401,  409. 

23  Shannon  v.  Frost,  42  Ky.  253,  258,  262.  Followed  in  regard  to 
parsonage  acquired  in  the  names  of  some  of  the  majority  who  separated 
from  the  old  church  and  the  Methodist  Church  South.  McKinney  v. 
Griggs,  68  Ky.  401,  408.  But  an  excommunication  of  a  majority  of  a 
local  cliurch  by  a  General  Assembly  without  trial  was  held  invalid  and 
so  the  property  was  awarded  to  the  majority  faction.  Watson  v.  Gar- 
vin, 54  Mo.  353,  381. 

^  "We  must  take  the  fact  of  excommunication  as  conclusive  proof 
that  the  persons  ex.scindcd  are  not  members.  But  we  may  inquire 
whether  the  resolution  of  expulsion  was  the  act  of  the  church  or  of  per- 
sons who  were  not  the  church  and  who  consequently  had  no  right 
to  excommunicate  others."  Bouldin  v.  Alexander,  15  Wall.  131, 
140. 

"  Gartin  v.  Pennick,  68  Ky.  110;  Poynter  v.  Phelps,  111  S.  W.  699. 

262 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

of  the  highest  tribunal  of  the  church  is  to  be  accepted  as 
final.  This  reduces  the  legal  problem  to  one  of  identity 
and  furnishes  a  simple  solution,  since  in  almost  all  such 
cases  the  church  tribunal  will  have  rendered  a  decision. 
Although  there  are  a  few  decisions  that  seem  opposed 
to  it,^^  and  some  the  effect  of  which  is  not  clear,^^  most 

2^  A  bill  to  enforce  a  trust  of  church  property.  The  church  had  with- 
drawn from  the  synod  with  which  it  had  been  connected.  Held:  The 
evidence  did  not  establish  that  the  property  was  held  in  trust  to  main- 
tain a  permanent  connection  with  that  synod.  Heckman  v.  Mees,  16 
Ohio  St.  583,  589. 

Held :  That  the  connection  of  a  Presbyterian  church  with  a  presby- 
tery is  voluntary  and  may  be  withdrawn,  and  hence  that  in  this  country 
if  a  Presbyterian  church  changes  its  religious  connection,  it  does  not 
forfeit  its  trust  property.  Attorney  General  v.  Federal  St.,  3  Gray  1, 
54. 

A  Lutheran  church  changed  its  synod  and  a  minority  withdrew  be- 
cause of  this  and  because  of  objection  to  certain  doctrinal  practices. 
They  bring  a  bill  to  enjoin  the  majority  from  use  of  the  church.  Held: 
In  the  absence  of  some  other  established  rule,  it  was  sufficient  that  these 
changes  were  made  by  a  majority.  "The  members  of  the  society  are  not 
to  be  treated  as  partners  entitled  to  a  division  of  the  property  on  a  disso- 
lution of  partnership  because  of  the  dissatisfaction  or  withdrawal  of  a 
minority,  but  they  are  jointly  associated  for  the  common  purposes; 
and  as  long  as  the  property  is  appropriated  to  such  purposes,  and  none 
are  prevented  from  participating  in  such  use  thereof,  there  is  no 
good  reason  why  the  views  of  the  majority  should  not  control  in 
the  management  thereof  in  the  absence  of  a  different  rule  lawfully 
established  or  existing."  Schradi  v.  Dornfeld,  52  Minn.  465,  473,  55 
N.  W.  49. 

2'  Unless  the  usages  of  a  church  authorize  the  withdrawal  of  an  indi- 
vidual church  from  the  general  organization  without  its  consent,  a 
minority  adhering  to  the  old  church  affiliation  under  such  circumstances 
will  be  held  entitled  to  the  church  property,  but  if  the  usages  of  the 
church  are  proved  to  permit  such  separation  without  mutual  consent, 
the  majority  would  be  entitled  to  the  property.  Vasconcellos  v.  Fer- 
raria,  23  111.  456,  27  111.  237.  On  another  trial  the  evidence  as  to  right 
of  withdrawal  was  conflicting.  Held:  Regardless  of  the  right  to  with- 
draw, both  parties  were  beneficiaries  before  withdrawal  and  continued 
to  be  after  it.  Church  ordered  sold  and  proceeds  divided  pro  rata  be- 
tween the  two  factions.    Ferraria  v.  Vasconcellos,  31  111.  25,  53. 

When  persons  join  a  church  belonging  to  a  general  organization  they 
assent  to  its  laws  and  are  entitled  to  the  impUcation  that  the  affairs  of 
the  church  are  to  be  managed  according  to  them.  When  the  general  or- 
ganization extends  over  several  States,  that  in  one  State  may  refuse 
to  obey  the  rest  without  being  chargeable  with  secession  (p.  14).  "  Union 
among  churches  is  a  perfectly  legitimate  part  of  their  purpose  and  of 
their  freedom  and  mutual  concession  is  part  of  the  natural  law  of  it 

263 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

cases  are  in  accord.^^  This  rule  has  been  generally  ac- 
cepted in  two  series  of  cases  that  have  come  before  the 
courts  of  many  States,  arising  first  from  the  dissen- 
sions over  the  revision  of  the  confession  of  faith  of  the 
United  Brethren,^^  and  more  recently  from  the  union 

which  we  cannot  direct  or  Umit "  (p.  27) .  "Law  deals  with  short  periods 
in  its  administration  and  with  indi\'iduals  and  societies  under  govern- 
ment and  expects  to  find  social  unity  continued  without  any  violent 
rupture  of  forms  or  departure  from  principles  and  yet  makes  all  rea- 
sonable allowances  for  development  according  to  principles  and  with 
due  respect  for  customarj^  forms"  (p.  29).  The  majoritj^  of  a  church 
that  accepted  a  union  of  two  church  organizations  was  held  not  to  have 
departed  from  the  fundamental  principle  of  its  organization  and  is  en- 
titled to  its  property  as  against  the  minority  (p.  29).  McGinnis  v.  Wat- 
son, 41  Pa.  St.  9. 

^*  First  Presbj'terian  Church  v.  Wilson,  77  Ky.  252,  268;  Simmons 
V.  AUison,  118  N.  C.  761,  770,  23  S.  E.  716;  Greek  Church  v.  Greek 
Church,  195  Pa.  St.  425,  435,  46  Atl.  72;  Cape  v.  Plymouth  Church, 
117  Wis.  150,  1.56,  93  N.  W.  449. 

A  rector  of  a  Protestant  Episcopal  church  by  virtue  of  his  office  has 
a  right  to  enter  into  the  church  edifice,  such  right  being  in  the  nature  of 
an  easement.  This  is  the  law  of  the  church,  the  effect  of  the  contract 
made  in  giving  him  a  call  whether  the  church  be  incorporated  or  not. 
Lynd  v.  Menzies,  33  N.  J.  L.  162,  167. 

29  A  national  church  organization  revised  its  confession  of  faith.  The 
members  of  one  church  in  the  denomination  divided  over  the  question 
and  the  minority  claimed  title  on  the  ground  that  those  adhering  to  the 
new  confession  had  left  the  church.  Held:  The  provision  of  the  old  con- 
stitution that  amendment  must  be  "on  request  of  two-thirds  of  the 
whole  society"  is  comphed  with  though  the  bishop  initiated  the  change 
and  submitted  the  question  to  vote.  Two-thii-ds  of  those  voting  is  suf- 
ficient (p.  410).  The  decision  of  the  church  tribunal  on  matters  of  doc- 
trine is  conclusive  on  ci\'il  courts  (p.  413).  Equity  will  not  interfere  to 
enforce  the  trust  of  church  property  in  such  case  unless  the  change  in 
fundamental  theological  doctrine  is  clear  (p.  415).  Kuns  v.  Robertson, 
154  111.  394,  40  N.  E.  343.  Ace.  Lamb  v.  Cain,  129  Ind.  486,  513,  516, 
29  N.  E.  13.  Ace.  (on  the  first  point)  Russie  v.  Brazzell,  128  Mo.  93,  107, 
109,  30  S.  W.  526;  Schlichter  v.  Keiter,  L56  Pa.  St.  119,  145,  27  Atl.  45. 

Taft,  J.,  agreed  with  the  principles  of  the  Illinois  case,  but  overruled 
a  demurrer  to  the  bill  in  equity  to  enjoin  interference  with  church  prop- 
erty on  the  allegation  that  not  sufficient  notice  of  the  time  to  vote  had 
been  given.     Brundage  v.  Deardorf,  55  Fed.  839,  849  (C.  C.  —  Ohio). 

The  constitution  of  1840  of  the  United  Brethren  was  adopted  by  the 
general  conference  without  submission  to  the  members.  It  was  a  vol- 
untary limitation  on  its  own  authority,  but  it  may  be  intei-preted,  when 
anibiguouH,  by  the  same  body  that  created  it  (p.  223).  The  conference 
could  determine  the  details  of  the  procedure  and  amend  the  constitu- 
tion (p.  225).    The  jjarticulur  question  here  involved  in  the  claim  to  the 

204 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

of  the  Cumberland  Presbyterian  Church  with  the  Pres- 
byterian Church  of  the  United  States. ^°    The  General 

property  of  the  church  is  one  merely  of  identity,  that  is,  which  is  the 
legal  successor  of  the  organization  to  which  the  property  was  conveyed. 
As  the  highest  church  judicatory,  the  general  conference  decided  that 
the  new  constitution  had  been  legally  adopted.  Civil  courts  must  accept 
that  decision  (p.  228).  Brundage  v.  Deardorf,  92  Fed.  214  (C.  C.  A.  — 
Ohio). 

The  later  conference  had  the  same  power  to  change  the  constitution 
that  the  earHer  one  did  to  enact  it.  A  constitution  by  acquiescence  is 
unknown  to  American  law,  but  the  new  constitution  at  least  took  effect 
as  an  ordinance  of  the  church.  Horsman  v.  AUen,  129  Cal.  131,  139,  61 
Pac.  796. 

The  contrary  result  was  reached  in  two  States.  Two-thirds  of  those 
voting  did  not  comply  with  the  rule.  The  law  as  to  political  elections 
does  not  apply  (p.  452).  The  original  constitution  was  binding  (p.  442). 
The  vote  was  not  a  request,  and  there  being  no  request  it  was  not  valid 
(p.  454).  The  decision  of  the  general  conference  was  not  a  judicial 
decision  but  a  legislative  one,  and  so  not  binding  on  the  courts.  It  did 
not  apply  a  rule  as  to  past  actions  but  laid  one  down  as  to  future  actions 
(p.  459).  Philomath  CoUege  v.  Wyatt,  27  Ore.  390,  31  Pac.  206,  37 
Pac.  1022.  Ace.  Bear  v.  Heasly,  98  Mich.  279,  308,  24  N.  W.  615  (by  a 
divided  court);  Lemp  v.  Raven,  113  Mich.  375,  71  N.  W.  627. 

^°  The  Presbyterian  Union  was  held  vahd  in  Sanders  v.  Baggerly,  96 
Ark.  117,  131  S.  W.  49;  Harris  v.  Cosby,  173  Ala.  81,  55  So.  231  (note 
curious  use  of  the  word  "corporation"  in  the  opinion);  Morgan  v. 
Gabard,  176  Ala.  568,  58  So.  902;  Permanent  Committee  v.  Pacific,  etc. 
Church,  157  Cal.  105,  106  Pac.  395;  Mack  v.  Kime,  129  Ga.  1,  25,  58 
S.  E.  184  (but  see  apparently  contradictory  statements  on  page  20); 
First  Church  v.  Fust  Church,  245  lU.  74,  91  N.  E.  761;  Ramsey  v. 
Hicks,  174  Ind.  428,  91  N.  E.  344;  Bentle  v.  Ulay,  175  Ind.  494,  94 
N.  E.  759;  WaUace  v.  Hughes,  131  Ky.  445,  115  S.  W.  684;  Carothers  v. 
Moseley,  99  Miss.  671,  55  So.  881 ;  Fust  Church  v.  Cumberland  Church, 
34  Okla.  503,  126  Pac.  197;  Brown  v.  Clark,  102  Tex.  323,  116  S.  W. 
361;  Horton  v.  Smith,  145  S.  W.  1088  (Tex.). 

Tennessee  held  the  union  of  Presbyterian  churches  void  on  doc- 
trinal grounds  (majority).  Landrith  v.  Hudgins,  121  Tenn.  556,  120 
S.  W.  783.  Such  being  the  law,  the  property  of  a  given  church  can  be 
transferred  to  the  Presbyterian  church  of  the  U.  S.  A.  only  by  unani- 
mous consent,  i.e.,  by  vote  or  by  acquiescence  for  so  long  a  time 
that  an  admission  from  conduct  may  be  inferred.  Bonham  v.  Harris, 
125  Tenn.  452,  145  S.  W.  169. 

But  since  no  rule  of  property  is  laid  down  by  those  cases  the  Federal 
courts  in  Tennessee  are  not  bound  to  foUow  them  and  hold  the  union 
vaUd.  Sherard  v.  Walton,  206  Fed.  562  (D.  C.  —  Tenn.).  Hehn  v. 
Zarecor,  213  Fed.  648,  656  (D.  C.  —  Tenn.);  Sharp  v.  Bonham,  213 
Fed.  660,  669  (D.  C.  —  Tenn.).  So  in  Missouri  the  union  was  held 
invalid.  Boyles  v.  Roberts,  222  Mo.  613,  121  S.  W.  805.  But  contra 
in  Federal  court.  Barkley  v.  Hayes,  208  Fed.  319,  833  (D.  C.  —  Mo.). 
See  also  Hayes  v.  Manning,  172  S.  W.  897  (Mo.). 

265 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

Conference  of  the  former  and  the  General  Assembly  of 
the  latter  were  the  supreme  judicial  as  well  as  legisla- 
tive and  executive  bodies  of  their  denominations.  Their 
decisions  which  in  each  case  represented  the  will  of  the 
majority  of  their  communicants  in  most  of  the  States 
were  accepted  as  final,  though  frequently  there  were 
qualifications  in  the  opinions  which  make  it  doubtful 
whether  the  doctrine  of  Watson  v.  Jones  was  accepted 
in  its  entirety.  In  two  earlier  cases  regarding  a  schism 
in  the  Society  of  Friends  this  doctrine  of  Watson  v. 
Jones  seems  to  have  been  foreshadowed.^^ 

In  England  the  highest  court  has  taken  a  different 
attitude  towards  this  question.  In  the  celebrated  Free 
Chiu*ch  of  Scotland  case,  one  church  desired  to  com- 
bine with  another  and  modified  the  Westminster  Con- 
fession to  do  it.     A  minority  objected  and  claimed  to 

51  There  may  be  such  a  departure  from  the  principles  of  Quaker- 
ism as  to  destroy  the  identity  of  the  society  and  leave  its  property 
derehct  (p.  459).  The  court  then  considered  the  evidence  and  decided 
that  the  Yearly  ]Meeting  for  New  England  had  jurisdiction  and  had 
decided  the  question  and  their  decision  was  followed  (p.  470).  Earle 
V.  Wood,  8  Cush.  430. 

A  schism  in  the  society  of  Quakers  came  before  the  court  on  a  ques- 
tion of  disputed  election  of  a  clerk  and  right  to  possession  of  church 
property.  No  question  of  doctrine  seems  to  have  been  involved.  Held: 
The  former  clerk  should  have  taken  the  vote  of  the  meeting  on  the  elec- 
tion of  his  successor.  "Civil  courts  in  determining  the  question  of 
legitimate  succession  in  cases  where  a  separation  has  taken  place  in  a 
voluntary  religious  society,  will  adopt  its  rules  and  will  enforce  the 
polity  in  the  spirit  and  to  the  effect  for  which  it  was  designed.  When 
public  policy  or  the  positive  law  of  the  land  is  not  contravened  the  de- 
cisions and  orders  of  the  society,  when  made  in  conformity  to  its  polity, 
should  have  the  same  effect  upon  the  subject  to  which  they  relate,  in 
civil  courts,  which  the  society  intended  should  be  awarded  to  them 
when  pronounced  by  its  own  judicatories.  If  such  society  is  composed 
of  separate  bodies,  whether  (;oordinated  or  subordinated,  the  rules  of 
the  society  for  th(^  management  of  its  internal  affairs  and  for  the  adjust- 
ment of  the  relations  between  its  branches  constitute  the  law  by  which 
they  should  be  governcHi."  Hence  the  decisions  of  various  yearly 
meetings  as  to  the  status  of  the  Ohio  Yearly  Meeting  were  entitled  to 
great  weight,  and  tlie  one  they  recognized  is  hekl  entitled  to  the  trust 
estate.     Harrison  v.  Hoyle,  24  Ohio  St.  254,  286. 

266 


Chap.  V]  RELIGIOUS  ASSOCIATIONS  [§61 

be  the  Free  Church  and  entitled  to  its  property.  The 
House  of  Lords,  overruhng  the  Scottish  court,  held  that 
it  was  ultra  vires  for  any  religious  body  to  alter  its  fun- 
damental principles  and  that  the  doctrine  modified  was 
of  that  nature  and  so  the  minority  were  entitled  to  the 
property.  All  counsel  agreed  that  the  question  was  one 
of  contract  and  of  trust  springing  from  contract  and 
the  issue  really  was  whether  the  original  contract  pro- 
vided for  authority  of  the  Assembly  to  modify  that 
contract.^-  There  are  American  cases  to  the  same 
effect. ^^ 

The  doctrine  of  Watson  v.  Jones  has  no  applica- 
tion to  the  decision  of  a  merely  advisory  tribunal  in 
a  denomination  organized  on  the  congregational 
principle.^^ 

It  is  to  be  noted  that  in  most  of  the  cases  above  cited 
the  tribunal  itself  interpreted  the  scope  of  its  jurisdic- 
tion and  that  its  decision  on  this  in  some  cases  was  ac- 
cepted as  final  by  the  civil  courts.  In  one  decision  at 
least  the  coiu"t  asserted  the  right  to  determine  inde- 
pendently in  all  cases  this  question  of  the  jurisdiction 
of  the  church  tribunal. ^^  This  case  was  criticised  in 
Watson  V.  Jones.  The  court  said  that  the  right  of 
civil  courts  to  question  the  jurisdiction  of  church  tri- 

32  Free  Church  of  Scotland  v.  Overtown,  (1904)  A.  C  515. 

33  Reorganized  Church  v.  Church  of  Christ,  60  Fed.  937,  953  (C.  C. 
—  Mo.);  Smith  v.  Pedigo,  145  Ind.  361,  379,  33  N.  E.  777,  44  N.  E. 
363. 

3*  JarreU  v.  Sproules,  20  Tex.  Civ.  App.  387,  395,  49  S.  W.  904.  See 
Godmundson  v.  ThingvaUa  Church,  150  N.  W.  750  (N.  D.). 

3^  The  order  of  a  synod  directing  the  election  of  additional  ruling 
elders  of  a  church  was  not  an  exercise  of  the  appellate  jurisdiction  as  a 
court  of  the  church.  It  was  not  authorized  by  the  constitution  of  the 
church  to  supersede  the  local  session.  Hence  the  ratification  of  its 
act  by  the  General  Assembly  was  unconstitutional  and  will  not  be 
recognized  by  the  civil  courts  as  a  purely  ecclesiastical  decision  or  one 
within  its  jurisdiction  affecting  property  would  be.  Watson  v.  Avery, 
65  Ky.  332. 

267 


§  61]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

bunals  applied  only  to  attempts  by  church  courts  to 
deal  with  personal  or  civil  rights  not  involving  any 
ecclesiastical  question  and  that  if  civil  courts  go  be- 
yond this  they  will  be  involved  in  questions  they  are 
unfit  to  answer.^^ 

When  there  has  been  a  voluntary  division  of  a  church 
organization  by  proper  authority  neither  organization 
can  claim  to  be  the  original  organization  and  each  re- 
sulting church  is  entitled  to  a  share  in  the  property  of 
the  original  association."    Where  the  original  organiza- 

36  Watson  V.  Jones,  13  WaU.  679,  733. 

3^  In  1844  the  general  conference  of  the  Methodist  Church  adopted 
a  resolution  authorizing  the  Southern  annual  conference  to  set  up  as 
a  separate  organization.  They  did  so  and  now  sue  for  a  pro  rata  divi- 
sion of  the  Methodist  Book  Concern,  a  fund  for  superannuated  and 
other  preachers  estabhshed  by  contributions  from  the  entire  church. 
Held :  The  general  conference  had  the  power  to  make  the  division  and 
neither  part  resulting  is  entitled  more  than  the  other  to  claim  to  be 
the  original  association  (p.  306).  The  power  was  inherent  in  the  gen- 
eral conference  which  originally  founded  the  church  (p.  307).  There 
having  been  a  division  of  the  church  by  proper  authority,  that  carried 
with  it  a  division  of  the  common  property  of  the  organization,  includ- 
ing the  Book  Concern  (p.  308).  Nothing  short  of  an  agreement  by  the 
church  South  to  surrender  its  rights  in  the  Book  Concern  would  pre- 
clude an  assertion  of  its  rights.  Hence  the  fact  that  certain  articles  of 
the  constitution  were  thought  to  interfere  with  a  division  of  the  Book 
Concern  and  that  a  plan  Was  provided  to  get  consent  of  all  the  con- 
ference to  waive  this,  which  plan  was  never  executed,  makes  no  differ- 
ence (p.  309).  Division  ordered  in  proportion  to  the  number  of  bene- 
ficiaries in  each  church  at  the  time  of  separation.  Smith  v.  Swormstedt, 
16  How.  288.  Ace.  Bascom  v.  Lane,  Fed.  Cas.  No.  1089  (C.  C.  — 
N.  Y.). 

Minor  differences  having  arisen  in  a  congregation,  they  divided  and 
trustees  of  the  original  church  conveyed  an  undivided  half  interest  in 
the  church  property  to  trustees  of  the  new  church.  Ilekl:  The  trustees 
were  authorized  to  make  this  division.  The  property  had  been  ac- 
quired by  contributions  of  the  members.  There  was  no  secession,  but 
a  voluntary  division.  Having  been  acquiesced  in  for  four  j^ears,  it 
should  not  be  disturbed.  Wicks  v.  Nedrow,  28  Neb.  386,  388,  44  N.  W. 
457. 

Two  religious  societies  agreed  on  joint  ownership  of  church  school 
and  burial  ground.  The  land  had  originally  been  conveyed  to  trustees 
for  one.  Tliey  now  H(!ok  i)artition.  Held:  While  the  trustees  had  no 
right  to  cliang(!  \\u\  l)eneficiaries,  the  bcuieficiiaries  could  tliemselves 
ratify    such    a   change.      The    two   associations,  under    Pennsylvania 

208 


Chap.  V]  DUES  [§  62 

tion  decided  that  congregations  in  certain  localities 
might  choose  which  of  the  subsequent  organizations 
they  would  affiliate  with,  the  property  of  those  con- 
gregations followed  the  determination  of  the  major- 
ity.^^  Thereafter,  however,  they  became  subject  to 
the  laws  of  the  branch  with  which  they  affiliated.^^ 

§  62.  Dues 

Difficulties  arise  when  an  association  attempts  to 
collect  dues  by  legal  process.  The  problem  was  in  sub- 
stance declared  insoluble  in  one  case,^  but  the  English 

statutes,  had  many  of  the  quaHties  of  corporations.  They  became 
tenants  in  common  and  partition  would  be  appropriate,  but  here  de- 
nied in  discretion  of  court  because  impracticable  to  sell  the  graveyard 
at  auction.     Brown  v.  Lutheran,  23  Pa.  St.  495,  500. 

38  The  Methodist  Church  divided  into  the  Methodist  Church 
North  and  the  Methodist  Church  South  and  fixed  territorial  Une  but 
allowed  the  border  churches  to  decide  which  general  conference  they 
would  adhere  to.  Held:  This  was  a  vahd  act  of  the  church  and  a 
majority  of  one  of  the  border  churches  could  decide  to  adhere  to  the 
Methodist  Church  South  even  if  the  Kentucky  conference  decided  the 
other  way.  The  minority  having  separated  from  the  rest,  have  lost 
their  right  to  use  the  church  property.  Deeds  construed  to  refer  to 
the  church  at  that  locahty  regardless  of  the  conference  adhered  to. 
Gibson  v.  Armstrong,  46  Ky.  481,  527.  Ace.  Humphrey  v.  Burnside, 
67  Ky.  215. 

39  Brooke  v.  Schaklets,  13  Grat.  301,  323  (Va.). 

The  Baltimore  conference  of  the  Methodist  Church  adhered  to  the 
Northern  organization  under  the  plan  of  separation  of  1844.  When  the 
war  broke  out  it  voted  to  join  the  church  South.  Held:  Property  held 
in  trust  for  its  churches  must  be  used  for  the  benefit  of  churches 
that  continued  to  adhere  to  the  church  North,  because  the  plan 
of  1844  did  not  contemplate  any  further  division  after  the  first. 
Hoskinson  v.  Pusey,  32  Grat.  428,  436;  Venable  v.  Coffman,  2  W.  Va. 
310,  324. 

^  Action  by  treasurer  of  cadets  for  fees  and  assessments.  Members 
on  joining  coips  signed  articles  of  association  promising  to  pay  treasurer 
such  fees  and  assessments.  Held:  Action  cannot  be  maintained.  It 
was  not  a  promise  to  the  plaintiff,  but  reaUy  a  prornise  to  the  treasurer 
for  the  time  being  or  the  then  treasurer  or  his  successors.  Such  a 
promise  cannot  be  enforced.  No  consideration,  because  it  did  not  ap- 
pear that  the  treasurer  had  incurred  any  expense  on  the  faith  of  the 
promise.  "The  difficulty  in  this  case  arises  from  an  attempt  made  to 
enable  an  association  of  individuals  frequently  shifting  and  changing 

269 


§  62]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

court  did  not  hesitate  to  allow  a  representative  of  the 
association,  designated  by  its  rules  for  that  piu-pose,  to 
sue  for  arrears. 2  A  different  problem  arises  when  the 
payment  to  be  collected  is  not  an  assessment  provided 
for  by  the  rules  of  the  association  and  assented  to  in 
advance  by  joining  the  association,  but  is  merely  a  sub- 
scription made  voluntarily  for  the  purposes  of  the  asso- 
ciation. The  problem  in  sucli  cases  belongs  rather  in 
the  law  of  contracts  than  that  of  associations.^  A  bill 
in  equity  against  all  subscribers  who  attended  a  public 
meeting  was  dismissed  because  the  causes  of  action  were 
separate.^ 

to  have  rights  of  succession  and  other  attributes  of  a  corporation." 
Warren  v.  Stearns,  19  Pick.  (Mass.)  73,  76,  78. 

2  Plaintiff  was  master  of  the  "Cocoa  Tree  Chib."  Rules  required  a 
subscription  to  be  paid  every  year,  and  if  no  notice  was  given  of  an  in- 
tention to  discontinue  they  were  to  be  considered  members  and  the 
master  was  empowered  to  coUect  "house  bills."  Held:  Every  member 
must  be  considered  debtor  to  the  master  for  arrears  unless  he  can  show 
prior  notice  to  discontinue.  Raggett  v.  Bishop,  2  C.  &  P.  343,  31  Rev. 
Rep.  668,  12  E.  C.  L.  607.  See  also  Raggett  v.  Musgrove,  2  C.  &  P. 
556. 

^  The  trustees  of  a  rehgious  society  which  has  never  been  incorpo- 
rated may  bring  suit  on  a  subscription  made  at  a  church  meeting  on 
Sunday  by  mutual  promises  though  no  payee  is  named  in  the  subscrip- 
tion paper.  Allen  v.  Duffie,  43  Mich.  1,  4,  4  N.  W.  427,  38  Am.  Rep. 
159. 

Action  at  law  by  the  building  committee  of  a  church  on  a  subscrip- 
tion by  a  member  of  a  congregation.  Held :  In  England  the  remedy 
would  he  only  in  equity  because  the  promise  was  to  no  particular  person 
or  persons  by  name.  As  equity  jurisdiction  has  been  restrained  the 
court  will  waive  technicahties  and  allow  the  action  for  the  purpose  of 
doing  justice.    Chambers  v.  Callioun,  18  Pa.  St.  13. 

By  statute  the  contract  of  a  voluntary  rehgious  society  with  its 
members  was  made  binding.  A  society  sued  in  its  association  name  a 
member  on  a  subscription  contract.  Held :  By  failing  to  pay  dues  or 
ceasing  to  believe  that  religion  he  is  not  discharged  from  his  contract. 
(Query,  if  coqwration.)     Congregational  Soc.  v.  Swan,  2  Vt.  222,  229. 

■•  Cheney  v.  Goodwin,  88  Me.  563,  569,  34  Atl.  420. 

A  subscriplion  to  build  a  road  payable  to  a  designated  "treasurer  of 
the  road  fund"  was  a  trust  fund  of  which  a  receiver  could  hv,  ai)pointed 
on  a  creditor's  \)i\\,  who  could  in  the  right  of  the  treasurer  and  the 
other  Hub.s<;riberH  collect  unpaid  subscriptions.  Rousseau  v.  Call,  85 
S.  E.  414  (N.  C). 

270 


Chap.  V]  DUES  [§62 

There  is  apparent  confusion  in  the  decisions  as  to  the 
right  of  an  association  to  increase  its  dues  without  the 
consent  of  its  members.  It  would  seem  that  in  the  ab- 
sence of  contract  rights  of  members,  such  as  are  involved 
in  fraternal  insurance,  an  association  must  have  an  in- 
herent right  to  increase  its  dues  if  the  increase  is  not 
retroactive.  But  it  has  been  held  in  England  that  a 
social  club  cannot  raise  the  dues  of  members  without 
unanimous  consent  where  the  rules  do  not  provide  for 
action  by  a  majority.^  As  to  contract  rights,  the  ques- 
tion must  be  whether  the  by-laws  are  made  part  of  the 
contract  and  whether  the  right  to  increase  dues  is  re- 
served in  the  by-laws  either  under  the  power  to  amend 
or  otherwise.^    After  a  benefit  has  accrued  under  such 

5  Harrington  v.  Sendall,  (1903)  1  Ch.  92.  See  Wise  v.  Perpetual  Trus- 
tee Co.,  (1903)  A.  C.  139. 

^  Action  on  a  benefit  certificate.  Defense  that  not  member  because 
did  not  pay  assessments.  Issue  on  validity  of  assessments  modifying 
the  original  contract.  Held:  Invahd  assessments  because  could  not 
enforce  the  contract  without  consent  of  all  contracting  parties.  "Not 
being  incorporated  its  wi'itten  articles  of  association  constitute  a  contract 
by  which  the  duties  of  its  officers,  the  duties  and  obligations  of  its  mem- 
bers among  themselves  and  the  scope  of  its  business  are  to  be  defined 
and  regulated.  Its  articles  of  association  bear  to  it  the  same  relation 
that  a  charter  bears  to  an  incorporated  society  and  constitute  its  funda- 
mental law,  in  accordance  with  which  all  subsequent  by-laws,  regula- 
tions and  amendments  must  be  made."  Hogan  v.  Pacific  Endowment 
League,  99  Cal.  248,  256,  33  Pac.  924. 

Action  on  benefit  claim.  Defense,  change  in  by-laws.  Held :  "It  has 
been  held  in  this  court  on  more  than  one  occasion  that  in  respect  to  the 
by-laws  of  a  voluntary  association  the  court  has  no  constitutional  power, 
and  cannot  determine  whether  they  are  reasonable  or  unreasonable, 
and  the  only  question  it  can  examine  is  whether  they  have  been  adopted 
in  the  way  which  has  been  agi-eed  upon  by  the  members  of  the  associa- 
tion." Kehlenbeck  v.  Logeman,  10  Daly  (N.  Y.)  447,  448.  Ace.  Cun- 
niff  V.  Jamour,  65  N.  Y.  S.  317,  31  Misc.  (N.  Y.)  729;  Uhner  v.  Mues- 
ter,  37  N.  Y.  S.  679,  16  Misc.  42,  73  N.  Y.  S.  260. 

An  unincorporated  mutual  benefit  association  may  amend  its  by- 
laws reducing  the  amount  of  an  accrued  benefit.  By-laws  may  be 
amended  by  the  enactment  of  changes  of  a  mere  regulative  kind  not 
inconsistent  with  the  fundamental  scheme  of  the  association.  Mar- 
shall V.  Pilot's  Ass'n,  18  Pa.  Sup.  Ct.  644. 

Unincorporated  benefit  society  incorporated  after  plaintiff's  hus- 

271 


§  62]  NON-PROFIT   ASSOCIATIONS  [Chap.  V 

a  contract  no  subsequent  modification  of  the  con- 
tract should  be  permitted  so  far  as  that  payment  is  con- 
cerned.'^ The  contract  involved  in  membership  in  these 
associations  is  to  be  interpreted  like  other  contracts,^ 
and  when  the  meaning  is  ascertained,  is  to  be  enforced, 
so  long  as  not  illegal  or  immoral,  whether  the  court 
thinks  it  reasonable  or  not.^  Where  the  constitution 
of  a  union  provided  for  the  forfeiture  of  instalments  of 
the  initiation  fee  if  false  statements  were  made  in  the 
application,  the  court  allowed  the  plaintiff  to  recover 
the  amount  when  the  statements  objected  to  were  as 
to  her  earning  capacity.^" 

band  became  member,  but  apparently  that  made  no  difference.  She 
claimed  a  benefit  and  objected  to  a  change  in  by-laws  reducing  amount. 
Held:  In  nature  of  these  assessment  societies  the  rate  may  be  changed, 
especially  when  it  is  provided  that  the  by-laws  may  be  amended.  Fugure 
V.  BurUngton  St.  Joseph's  Mut.  Soc,  46  Vt.  362,  370. 

He  cannot  recover  the  benefits  of  the  amendment  and  repudiate  its 
obUgations.  Berg  v.  Unterstutzungs  Verein,  86  N.  Y.  S.  429,  90  App. 
Div.  474. 

">  Poultney  v.  Bachman,  10  Abb.  N.  Cas.  (N.  Y.)  252.  See  Kehlen- 
beck  V.  Logeman,  10  Daly  447,  448  (N.  Y.). 

*  The  doctrine  that  a  partnership  may  make  its  own  laws  and  that 
these  wiD  be  enforced  by  courts  does  not  permit  it  to  construe  these  con- 
tracts in  other  than  their  plain  Enghsh  meaning.  Wiggin  v.  Knights  of 
Pythias,  31  Fed.  122,  124  (C.  C.  —  Tenn.). 

^  Action  for  benefit  against  treasurer  of  labor  union.  Constitution 
provided  that  if  in  arrears  three  months,  right  was  forfeited.  It  was 
claimed  this  proviso  was  unreasonable.  Held:  "Here  the  defendant 
is  a  voluntary  association  and  the  proviso  is  contained  in  the  constitu- 
tion subscribed  by  its  members.  That  constitution  is  the  contract  be- 
tween the  parties,  and  if  its  provisions  are  not  illegal,  immoi'al  or  con- 
trary to  pubhc  pohcy  it  must  be  upheld  whether  reasonable  or  not,  for 
parties  have  the  right  to  enter  into  unreasonable  or  unwise  contracts 
8o  long  as  such  contracts  are  not  illegal  and  arc  fairly  made.  This  is  the 
distinction  between  the  case  of  a  voluntary-  association  and  a  corpora- 
tion."   Hess  V.  Johnson,  58  N.  Y.  S.  83,  41  App.  Div.  465. 

Unusual  form  of  certificate  of  membership  in  a  Board  of  Trade  with 
membership  fee  and  trust  fund  for  redemption  of  certificates.  Admin- 
istrator of  a  deceased  member  could  maintain  bill  in  equity  for  redemp- 
tion of  the  certificate  by  the  association.  Halbcrt  v.  Traders'  Exchange, 
173  111.  App.  220,  233. 

'»  U-vin  V.  Cosgrovc,  75  N.  J.  L.  344,  67  Atl.  1070. 

272 


Chap.  V]     MUTUAL  OBLIGATIONS   OF   MEMBERS  [§  63 

§  63.   Mutual  Obligations  of  Members 

It  is  said  that  one  member  of  an  association  owes  no 
fiduciary  obligation  to  the  others,  such  as  one  partner 
owes  another.^  On  the  other  hand,  a  member  has  ho 
right  to  sue  for  his  share  of  the  property  of  the  associa- 
tion on  the  ground  that  its  purpose  has  failed  without 
joining  all  members  in  a  final  accounting  as  in  partner- 
ship.2    It  has  also  been  held  that  one  member  cannot 

'  Hence  if  he  gets  a  lease  of  land  the  club  had  occupied  for  ten  years 
for  tennis  court,  he  is  not  to  be  deemed  trustee  of  it  for  the  association. 
Lumbard  v.  Grant,  71  N.  Y.  S.  459,  1141,  62  App.  Div.  617. 

2  Plaintiff  at  a  public  meeting  of  the  Friends  of  Ireland  contributed 
$100  to  the  cause.  Before  the  meeting  a  board  of  forty-eight  directors 
had  been  chosen,  who  elected  defendant  treasurer.  Defendant  under 
advice  of  directors  invested  money  in  stocks.  It  had  not  been  apphed 
yet,  but  apparently  purpose  had  not  failed.  Plaintiff  sues  for  money 
had  and  received.  Held:  Plaintiff  cannot  recover.  Money  was  received 
by  directors,  not  by  defendant.  He  was  to  pay  it  out  on  order  of  direc- 
tors and  so  does  not  hold  it  on  any  trust  for  plaintiff.  The  money  having 
been  invested  by  order  of  directors,  defendant  has  no  money.  Donations 
were  to  a  conamon  fund  and  even  if  plaintiff  has  right  to  a  share  in  it  on 
ground  that  purpose  for  which  it  was  raised  had  failed,  his  right  is  only 
to  his  proportionate  part  after  payment  of  expenses.  This  involves  ac- 
counting to  which  aU  contributors  are  parties.  Query,  if  defendant  had 
any  power  of  revocation  before  money  was  invested.  Murray  v.  Mc- 
Hugh,  9  Gush.  158,  167. 

Bill  by  members  of  an  Odd  Fellows  Lodge  against  other  members  for 
a  declaration  that  their  exclusion  from  the  lodge  was  illegal  and  for  an 
injunction  against  apphcation  of  funds  of  the  lodge  otherwise  than  ac- 
cording to  its  rules.  Held  on  demm'rer  that  the  bill  did  not  seek  a  dis- 
solution that  the  only  reUef  sought  would  not  be  granted  without  join- 
ing parties  who  would  make  the  case  unmanageable  and  that  the  court 
could  not  simply  make  a  declaration  of  right.  Demurrer  sustained. 
Clough  V.  Ratchffe,  1  De  G.  &  Sm.  164,  180. 

Plaintiff  was  a  member  of  an  Odd  Fellows  HaU  Association  formed  to 
raise  money  to  repair  and  furnish  Odd  Fellows  Hall.  Two  thousand 
dollars  was  subscribed  and  transferable  certificates  for  $20  each  issued  to 
the  contributors.  Plaintiff  held  several  shares.  The  money  was  spent 
for  the  purpose  designated.  The  furniture  bought  was  placed  in  the 
hall.  The  hall  was  now  used  by  a  new  lodge,  successor  to  the  old. 
Plaintiff  seeks  to  require  the  other  members  to  buy  his  share,  or  to 
have  the  furniture  sold  and  his  proportionate  share  paid  him.  Held: 
There  is  no  equity  in  the  bill.  It  would  be  a  violation  of  the  original 
understanding  and  a  breach  of  faith.  Robbins  v.  Waldo  Lodge,  78  Me. 
565,  7  Atl.  540. 

273 


§  63]  NON-PROFIT   ASSOCIATIONS  [Chap.  V 

sue  another  at  law  on  a  contract  of  the  association.' 
As  previously  stated,  courts  decline  to  interfere  in  the 
internal  affairs  of  associations  unless  property  or  civil 
rights  are  involved."*  A  member  of  a  mutual  insurance 
association  may  bring  a  bill  in  equity  against  its  officers 
to  compel  them  to  levy  an  assessment  as  required  by 
his  contract.^  Members  who  make  advances  for  the 
association  for  work  within  the  scope  of  the  associa- 
tion may  bring  a  bill  in  equity  for  contribution  against 
the  other  members  even  though  they  did  not  expressly 
authorize  it,  but  they  must  be  members  of  a  determi- 
nate association  and  not  merely  attendants  at  a  public 
meeting.^  Statements  made  by  a  member  regarding 
another  in  the  course  of  the  business  of  the  association 
are  "prima  facie  privileged. '^     Members  are  not  liable 

*  Association  to  build  a  meeting  house.  Held :  One  member  cannot 
sue  others  at  law  for  labor  done.  Cheney  v.  Clark,  3  Vt.  431,  435,  23 
Am.  Dec.  219. 

A  boating  club  contracted  with  the  commodore  to  build  a  boat  and 
paid  him.  It  proved  defective  and  he  agreed  to  build  another.  Action 
at  law  by  some  of  the  members  in  own  right  and  as  assignees  of  other 
members,  but  not  of  all  members  apparently.  Held:  Though  not 
strictly  partners,  "the  rights  of  the  associates  in  the  property  and  the 
modes  of  enforcing  them  are  not  materially  different  from  those  of 
partners  in  the  partnership  property.  '^  Prima  facie  the  interest  of 
each  associate  in  the  property  and  effects  of  the  association  is  equal  or 
proportionate.  No  associate  has  an  interest  therein  which  can  be  sep- 
arated and  taken  out  of  the  whole  for  his  sole  use  until  tlie  joint  affairs 
ar(^  settled,  the  association  dissolved,  the  mutual  rights  of  the  members 
adjusted  and  the  ultimate  share  of  each  determined."  Hence  no  action 
at  law  against  the  defendant,  a  member.  McMahon  v.  Rauhr,  47 
N.  Y.  67. 

"  Bennett  v.  Kearns,  88  Atl.  806  (R.  I.). 

^  Kimball  v.  Lower  Columbia  Ass'n,  67  Ore.  249,  135  Pac. 
877. 

«  Cheney  v.  Goodwin,  88  Me.  563,  568,  34  Atl.  420.  Apart  from 
provisions  in  the  ruk's,  the  trustees  of  an  ordinary  social  club  have  a 
riglit  of  indemnity  against  individual  meinb(>rs  for  money  jjcrsonally 
cx])('nd(d  in  jjaying  club  debts.  Wise  v.  Perpetual  Trustee  Co.,  (1903) 
A.  C.  139. 

'  Stattunc^nts  made  by  a  member  of  an  association  to  a  superior  officer 
about  a  matter  of  interest  to  the  organization  are  i)rivik'ged  if  made  in 

274 


Chap.  V]  LIABILITY  OF   MEMBERS  [§  64 

for  enforcing  the  rules  of  the  association.^  Courts  of 
equity  have  jurisdiction  of  such  cases  because  there 
is  no  adequate  remedy  at  law.  Mandamus  is  not  the 
appropriate  remedy  to  regulate  the  affairs  of  an  unin- 
corporated association.® 

§  64.  Liability  of  Members 

The  striking  distinction  between  associations  for 
profit  and  non-profit  associations  is  in  the  basis  of  liabil- 
ity of  individual  members  for  association  obligations. 
All  members  of  a  partnership  are  personally  liable  for 
partnership  debts.  In  the  kind  of  association  now 
under  consideration,  only  those  members  are  liable  who 

good  faith.  O'Donaghue  v.  McGovern,  23  Wend.  26,  31  (church);  Bar- 
baud  V.  Hookham,  5  Esp.  109  (military  company);  Maitland  v.  Bram- 
well,  2  F.  &  F.  623  (subscriber  to  charity  to  the  committee  of  manage- 
ment) (but  not  if  to  other  subscribers,  Hoare  v.  Silverlock,  12  Q.  B. 
624;  see  Martin  v.  Strong,  5  Ad.  &  E.  535).  So  of  statements  to  an- 
other member  in  the  course  of  proceedings  of  the  association.  Jarvis 
V.  Hatheway,  3  Johns.  180  (church);  Fairchild  v.  Adams,  11  Cush. 
549,  559  (statement  by  member  of  ministers'  association  as  to  reason 
for  his  vote);  Shurtleff  v.  Stevens,  51  Vt.  511,  501,  515  (ditto);  Farns- 
worth  V.  Storrs,  5  Cush.  412,  416  (reading  sentence  of  excommunication) ; 
Landis  v.  Campbell,  79  Mo.  433,  440  (reading  resolution);  Lucas  v. 
Case,  72  Ky.  297,  302  (report) ;  York  v.  Pease,  2  Gray  282,  284  (defense 
at  hearing);  Remington  v.  Congdon,  2  Pick.  310,  315  (ditto.  Defendant 
a  non-member).  So  of  publication  of  sentence  in  a  church  paper. 
Redgate  v.  Roush,  61  Kan.  480,  483.  On  the  facts  held  not  within 
above  rules.  Shurtleff  v.  Parker,  130  Mass.  293,  297;  Lovejoy  v.  Whit- 
comb,  174  Mass.  586,  588;  Hocks  v.  Sprague,  113  Wis.  123,  132;  State 
V.  Bienvenue,  36  La.  Ann.  278,  383;  Gilbert  v.  Crystal  Lodge,  80  Ga. 
284,  4  S.  E.  905. 

^  Plaintiff  insisted  on  sitting  at  a  camp  meeting  in  the  place  re- 
served for  women.  He  was  removed  and  detained  and  brings  action 
for  false  imprisonment.  Held:  The  rules  of  the  society  were  admissi- 
ble in  mitigation  of  damages.  They  may  prescribe  such  rules  as  they 
think  proper  for  preserving  order  at  meetings.  If  after  notice  defendant 
refused  to  comply,  they  had  the  right  to  use  necessary  force  to  remove 
him.     McLain  v.  Matlock,  7  Ind.  525,  528. 

9  State  V.  Cook,  119  Minn.  407,  138  N.  W.  432.  See  Lahiflf  v.  Ben. 
Soc,  76  Conn.  648,  57  Atl.  692.  It  was  assumed  to  be  the  proper 
remedy  in  Raych  v.  Hadida,  130  N.  Y.  S.  346,  349,  72  Misc.  469.  See 
§  56,  note  28. 

275 


§  64]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

expressly  or  impliedly  with  full  knowledge  authorize  or 
ratify  the  specific  acts  in  question.^ 

1  Matter  of  St.  James  Club,  2  De  G.  M.  &  G.  383,  390,  16  Jur. 
1075  (social  club);  Wood  v.  Finch,  2  Fost.  &  Fin.  447  (club  to  buy 
coal  at  wholesale  for  members);  Fleming  v.  Hector,  2  Gale  180,  2  M.  & 
W.  172  (ditto);  Delaunej^  v.  Strickland,  2  Stark.  416,  3  E.  C.  L.  470 
(social  club);  Hawke  v.  Cole,  62  L.  T.  Rep.  n.  s.  658  (navj^  mess); 
Overton  v.  Hewett,  3  T.  L.  R.  246,  248  (member  of  managing  com- 
mittee of  club);  Fox  v.  Narramore,  36  Conn.  376,  382  (miUtarj'  com- 
pany); Davidson  v.  Holden,  55  Conn.  103,  112,  10  Atl.  515  (coopera- 
tive store);  Augusta  Club  v.  Cotton  States,  etc.  Fair  Ass'n,  50  Ga. 
436,  442  (committee  of  arrangements  of  a  fair) ;  Murray  v.  Walker,  83 
la.  202,  48  N.  W.  1075  (assisting  in  holding  a  fair.  Liable  for  prizes) ; 
Schumaker  v.  Sumner  Tel.  Co.,  161  la.  326,  142  N.  W.  1034,  1037 
(members  of  a  farmers'  telephone  hne  not  hable  on  a  note  in  name  of 
association);  Newell  v.  Borden,  128  Mass.  31  (fire  engine  company. 
Vote  at  meeting);  Volger  v.  Ray,  131  Mass.  439  (poultry  association. 
Liability  for  prizes);  Ray  v.  Powers,  134  Mass.  22  (ditto);  Ferris  v. 
Thaw,  5  Mo.  App.  279,  286  (Masonic  lodge);  Hammerstein  v.  Parsons, 
38  Mo.  App.  332,  335  (benefit  certificate) ;  Riffe  v.  Proctor,  99  Mo.  App. 
601,  608,  74  S.  W.  409  (church);  Hornberger  v.  Orchard,  39  Neb.  639, 
642,  58  N.  W.  425  (social  club);  Sizer  v.  Daniels,  66  Barb.  426,  433 
(pohtical  committee);  Hosman  v.  Kinneallj-,  86  N.  Y.  S.  263,  43  Misc. 
76  (see  90  N.  Y.  S.  357)  (sociahstic  labor  party.  Action  by  employee 
of  a  newspaper  conducted  by  trustees  and  supported  by  fixed  con- 
tributions from  members);  Lightboume  v.  Walsh,  89  N.  Y.  S.  856,  97 
App.  Div.  187;  Siflf  v.  Forbes,  119  N.  Y.  S.  773,  135  App.  Div.  39  (loan 
to  socialist  labor  party);  Devoss  v.  Graj',  22  Ohio  St.  159,  169  (trustees 
of  a  church);  Eichbaum  v.  Irons,  6  Watts  &  S.  67  (Pa.)  (dinner  com- 
mittee appointed  at  a  pubhc  meeting);  Ash  v.  Guie,  97  Pa.  St.  493, 
498  (Masonic  lodge);  Winona  Lumber  Co.  v.  Church,  6  S.  D.  498,  503, 
62  N.  W.  107  (trotting  park);  .Arkins  v.  Dominion  Live  Stock  Asso- 
ciation, 17  Ont.  Pr.  Rep.  303,  305  (club). 

Business  agent  of  a  labor  union  made  contract  with  plaintiff  for 
use  of  union  label  which  union  later  broke.  He  sued  individual  mem- 
bers of  the  union.  Held:  Cannot  sue  them  as  individuals.  Hint  that 
proper  remedy  is  equity  to  reach  funds  of  union.  Eliriich  v.  Willenski, 
138  Fed.  425. 

Members  of  a  church  signed  a  call  to  a  pastor  agreeing  to  pay  him 
$1,000  per  year.  He  performed  the  services.  The  signers  were  held  per- 
sonally liable.  Thompson  v.  Garrison,  22  Kan.  766.  Contra,  Paddock  v. 
Brown,  6  Hill  530  (N.  Y.).    See  Neill  v.  Spencer,  5  111.  Apjx  461,  472. 

After  foreclosure  of  a  church  mortgage  a  bill  was  brought  under  the 
code  to  collect  the  balance  of  the  debt  from  the  members  of  the  church 
without  alleging  their  autliorization  of  the  indebtedness.  Held:  Bill 
dismi-s-scid.  Such  an  as.sociation  is  not  a  partnershij)  witliin  the  mean- 
ing of  the  code.  Its  members  are  not  individually  liable  for  its  debts 
unless  authorized  or  ratified.  First  Bank  v.  Rector,  59  Neb.  77,  79, 
80  N.  W.  2(i9. 

Action  against  a  large  number  of  members  of  an  unincorporated 

270 


Chap.  V]  LIABILITY  OF  MEMBERS  [§  64 

This  rule  has  been  strictly  applied  in  a  suit  by  a 
trustee  of  an  unincorporated  club  against  a  member 
for  indemnity  against  a  liability  on  a  lease  incurred 
solely  by  reason  of  his  acting  in  the  capacity  of  trus- 
tee. The  English  privy  council  made  an  exception  to 
the  rule  which  it  had  previously  laid  down  in  regard  to 
like  actions  by  trustees  of  associations  for  profit,-  and 
held  that  because  of  the  rule  that  members  of  clubs 
inciu-  no  individual  hability  beyond  their  subscriptions 
unless  they  in  fact  authorize  or  ratify  the  act  imposing 
the  obligation,  the  trustee  could  not  enforce  a  right  to 
indemnity  against  the  defendant  merely  because  of  the 
fact  of  membership.^ 

The  fact  that  the  defendant  made  payments  on  ac- 
count as  treasurer  was  held  not  ratification  so  as  to 

congregation  of  Roman  Catholics  on  an  account  stated  between  a 
former  priest  represented  by  the  plaintiff  and  his  successor  and  others 
alleged  to  be  authorized  by  the  defendants  to  represent  the  congre- 
gation in  such  matters.  Held:  The  habihty  is  not  based  on  partner- 
ship but  on  agency  and  the  defendants  are  bound  not  because  of  mem- 
bership but  because  of  authorization  or  ratification.  Sheehy  v.  Blake, 
72  Wis.  411,  414,  416,  39  N.  W.  479.  Evidence  was  held  sufficient  to 
show  authorization  or  ratification.  Sheehy  v.  Blake,  77  Wis.  394,  399, 
46  N.  W.  537. 

Action  on  a  note  given  for  church  furniture  sold  by  plaintiff.  The 
note  was  signed  individually  by  two  who  wrote  after  their  names 
"Deacons  Mount  Carmel  Church."  The  action  was  brought  against 
them  and  the  trustees  of  the  chvu-ch  in  their  official  capacity.  Held: 
An  unincorporated  association  cannot  be  sued  as  such.  The  members 
who  incur  the  hability  or  later  assent  to  or  ratify  it  are  hable  as  in- 
dividuals. Burton  v.  Grand  Rapids  Co.,  10  Tex.  Civ.  App.  270,  31 
S.  W.  91. 

In  one  case  it  was  said  that  the  hability  was  that  of  partners  but 
because  it  was  a  non-trading  partnership  there  was  no  imphed  author- 
ity to  issue  notes  (farmers'  telephone  line) ;  Schumaker  v.  Sumner  Tel. 
Co.,  161  la.  326,  142  N.  W.  1034.  See  similar  loose  language  in  regard 
to  a  rehgious  community.  Teed  v.  Parsons,  202  111.  455,  460,  66  N.  E. 
1044,  and  a  college  fraternity,  Korsted  v.  WlUiams,  80  Wash.  452, 
457,  141  Pac.  887.  Members  of  a  church  have  even  been  said  to  be 
"Hable  on  its  contracts  as  joint  promissors  or  partners."  Thurmond 
V.  Cedar  Sprmgs  Church,  110  Ga.  816,  36  S.  E.  221. 

2  Hardoon  v.  Behhos,  (1901)  A.  C.  118,  125. 

»  Wise  V.  Perpetual  Trustee  Co.,  (1903)  A.  C.  139,  149. 

277 


§  64]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

bind  him  as  an  individual  member.^  Ratification  by  a 
national  convention  of  a  political  party  did  not  amount 
to  ratification  by  the  individual  members  of  that  party.^ 
The  mere  fact  of  membership  and  payment  of  dues  is 
not  enough,^  nor  attendance  at  a  meeting  at  which  were 
read  and  approved  the  minutes  of  the  former  meeting 
that  ratified  the  act  of  a  committee.^  But  knowledge 
that  the  plaintiff  was  performing  her  part  of  the  con- 
tract was  sufficient.^  Publication  from  time  to  time 
to  members  of  a  church  of  a  liability  to  its  pastor  for 
unpaid  salary  and  loans  after  an  accounting  with  him 
was  held  sufficient  evidence  to  warrant  a  finding  of  rati- 
fication.^ Of  course  if  the  contract  was  made  before  a 
member  joined  an  association, ^°  or  after  he  retired," 

4  Devoss  V.  Gray,  22  Ohio  St.  159,  169. 

5  Siff  V.  Forbes,  119  N.  Y.  S.  773,  135  App.  Div.  39. 

6  Lightbourne  v.  Walsh,  89  N.  Y.  S.  856,  97  App.  Div.  187  (associa- 
tion pubhshing  a  newspaper). 

7  Meriwether  v.  Atkin,  137  Mo.  App.  32,  37,  119  S.  W.  36  (lodge). 

Contract  by  a  printer  against  members  of  a  college  class  for  print- 
ing of  a  volume  on  a  written  contract  with  A,  who  had  been  elected 
by  the  class  business  manager  of  the  pubhcation.  There  was  evidence 
that  the  plaintiff  gave  credit  to  the  class.  Judgment  for  plaintiff. 
Held:  "It  was  competent  for  the  coiu-t  to  infer  from  aU  the  evidence 
that  the  defendants  who  were  present  at  the  class  meeting  at  which 
it  was  voted  to  pubhsh  a  volume  to  be  called  'The  Brown  and  Blue' 
either  voted  to  publish  the  volume  or  assented  to  the  vote.  This  is 
true  of  the  vote  by  which  Arnold  was  elected  'business  manager  of  the 
publication.'  The  contract  made  by  Arnold  was  apparently  within 
the  scope  of  his  employment,  at  least  the  court  will  so  find."  Willcox 
V.  Arnold,  162  Mass.  577,  578,  39  N.  E.  414. 

8  Heath  v.  Goshn,  80  Mo.  310  (board  of  regents  of  a  school). 
Members  of  a  lodge  who  attended  meetings  in  a  hall  hired  for  it  by 

its  trustees  without  express  authority  must  be  held  to  have  ratified  the 
contract  though  they  did  not  know  the  terms  of  the  lease.  "He  may 
ratify  by  voluntarily  assuming  the  risk  without  in(|uiry  or  he  may  de- 
liberately ratify  on  such  knowledge  as  he  ])ossesses  without  caring  for 
more."    EhrmanntTaut  v.  Robinson,  52  Minn.  333,  335,  54  N.  W.  188. 

9  Shceliy  v.  Blake,  77  Wis.  394,  399,  46  N.  W.  537. 

10  IIornb(!rger  v.  Orchard,  39  Neb.  639,  643,  58  N.  W.  425  (social 
club);  Barry  v.  Nuckolls,  2  Humph.  324  (Tenn.)  (dramatic  society. 
Rent). 

"  Rhoads  v.  Fitzpatrick,  166  Pa.  St.  294,  296,  31  Atl.  79. 

278 


Chap.  V]  LIABILITY  OF   MEMBERS  [§  64 

he  cannot  be  held  to  have  authorized  it.  Cases  which 
have  talked  loosely  as  though  something  less  than  au- 
thorization or  ratification  would  suffice  are  not  likely 
to  be  followed. ^2  There  are  cases,  however,  where  it  was 
properly  held  that  the  purpose  of  the  association  was 
such  that   mere  membership  necessarily  implied  au- 

12  A  citizens'  meeting  voted  to  continue  a  newspaper  in  Welsh  and 
appointed  J  editor  and  authorized  him  to  find  a  publisher  who  was  to 
be  guaranteed  by  the  committee  against  loss  to  the  extent  of  £300. 
J  engaged  plaintiff,  but  no  formal  guarantee  was  written.  J  saw  the 
resolution.  Held:  Defendant  who  attended  the  meeting  is  hable. 
With  the  others  he  should  bear  the  pubhsher  harmless  to  the  ex- 
tent of  £300.     Waterlow  v.  Cotton,  2  AVkly.  Rep.  562. 

Action  for  price  of  a  supper  ordered  by  committee  of  arrangements 
appointed  by  a  pohtical  club  to  get  up  a  ball.  Held:  Though  in 
ordinary  cases  of  joint  contract,  if  one  defendant  sets  up  denial  of 
the  joint  contract  plaintiff  must  prove  the  joint  contract  and  hold 
him  though  other  defendants  have  defaulted.  "But  when  the  con- 
tract is  made  on  behalf  of  a  firm  or  an  association  and  the  hability  of 
the  firm  or  association  is  proved,  it  is  enough  for  the  plaintiff  to  show 
that  the  persons  who  appear  and  defend  are  members  of  such  firm  or 
association  and  so  are  liable  with  the  other  defendants  whose  member- 
ship is  admitted."  Downing  v.  Mann,  3  E.  D.  Smith  (N.  Y.)  36,  46, 
9  How.  Pr.  (N.  Y.)  204. 

An  unorganized  club  without  constitution  or  by-laws  was  held  not 
a  joint  stock  association  under  the  New  York  statute.  But  it  was  said 
that  all  the  members  were  hable  to  one  who  had  furnished  goods  to  it 
from  time  to  time  on  the  order  of  its  steward,  having  never  been 
notified  that  they  had  arranged  to  have  the  steward  buy  for  himself 
and  then  sell  to  them.     Park  v.  Spaulding,  10  Hun  128. 

The  members  of  a  mutual  benefit  association  are  personally  liable 
for  the  benefit  provided  by  the  court  and  by-law  and  because  under 
statute  beneficiary  may  sue  the  association  by  its  officers.  Strauss  v. 
Thoman,  111  N.  Y.  S.  745,  748,  60  Misc.  72. 

After  Harrison  was  elected  a  meeting  was  held  and  appointed  a  com- 
mittee to  arrange  a  dinner.  Held:  He  can  recover.  Non-joinder  of 
others  of  committee  not  pleaded  in  abatement.  Defendants  were  not 
agents  of  a  club.  "A  club  is  a  definite  association  organized  for  in- 
definite existence;  not  an  ephemeral  meeting  for  a  particular  occasion 
to  be  lost  in  the  crowd  at  its  dissolution."  All  defendants  who  concurred 
in  the  order  are  liable.  Some  who  at  first  objected  but  finally  yielded 
are  still  hable.  "Every  member  present  assents  beforehand  to  what- 
ever the  majority  may  do  and  becomes  a  party  to  the  acts  done,  it 
may  be,  directly  against  his  will.  If  he  would  escape  responsibility 
for  them  he  should  protest  and  throw  up  his  membership  on  the  spot." 
(Gibson,  J.).  Eichbaum  v.  Irons,  6  Watts  &  S.  (Pa.)  67,  40  Am.  Dec. 
540. 

279 


§  64]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

thorization  of  contracts  such  as  that  in  suit.^^  Members 
who  authorize  or  ratif}'  are  hable  whether  or  not  they 
intended  to  become  Hable  or  understood  the  law.^^  If 
the  plaintiff  agreed  that  the  members  should  not  be  in- 
dividually bound,  they  are  not  liable/^  and  likewise  if 
it  was  agreed  that  the  plaintiff  should  look  only  to  a 
certain  fund  for  pa\TQent>^     In  equity  the  members 

13  Lawler  v.  Murphy,  58  Conn.  294,  313,  20  Atl.  457  (benefit  cer- 
tificate) ;  Cheney  v.  Goodwin,  88  Me.  563,  567,  34  Atl.  420  (association 
formed  to  bring  a  shoe  facton,-  to  to^\Ti) ;  Richmond  v.  Judj-,  6  Mo.  App. 
465,  468  (members  of  a  campaign  committee  may  be  assumed  to  know- 
that  their  association  will  incur  expense  for  meetings) ;  L^-nn  v.  Com- 
mercial Club,  31  S.  D.  401,  141  X.  W.  471  (commercial  club);  Ridgely 
t).  Hobson,  3  Watts&  S.  118,  122  (Pa.)  (members  of  association  formed 
to  run  a  pubhc  Hbrar\'  are  hable  for  books  purchased  by  agent); 
Cockerell  v.  Aucompte,  2  C.  B.  n.  s.  440,  3  Jur.  x.  s.  844  (club  to  buy 
coal  at  wholesale  for  members) ;  But  see  contra,  Fleming  v.  Hector,  2 
Gale  180,  6  L.  J.  Ex.  43,  2  M.  &  W.  172,  where  it  was  said  that  ex- 
press authoritj'  to  buj'  on  credit  was  necessan,-  where  a  fund  was  pro- 
\aded  for  pajTnent,  even  though  defendant  knew  the  coal  was  being 
bought.     Wood  V.  Finch,  2  Foster  &  Fin.  447. 

At  a  mass  meeting  a  "Guarantee  Committee"  was  organized  to 
contract  with  a  promoter  to  paj'  him  870,000  to  build  a  railroad.  The 
contract  was  authorized  and  a  sub-committee  was  appointed  to  bor- 
row money  to  make  the  first  pajToent.  This  was  done.  Later  a  con- 
stitution and  by-laws  were  adopted  and  officers  elected  whose  powers 
were  Umited,  so  that  a  vote  of  the  association  would  be  necessary  to 
authorize  them  to  borrow.  They  renewed  their  original  notes  at  a 
different  bank  without  such  vote.  The  notes  were  signed  by  certain 
individual  members  of  the  association.  Action  against  the  makers  of 
the  note.  Answer  claimed  contribution  against  aU  members  of  the 
association.  Amended  petition  joined  all  members  as  defendants. 
Held:  All  members  of  the  association  were  jointly  and  severally  hable. 
The  original  note  being  authorized,  its  renewal  by  officers  of  the  more 
formal  association  required  no  special  authority.  The  makers  had  a 
right  of  contribution  against  tlie  other  members.  Since  the  contract 
with  the  promoter  was  for  the  purpose  of  carrj-ing  out  the  ver>'  pur- 
poses of  the  association,  when  the  work  has  been  done  it  is  too  late  to 
object  that  defendants  were  not  present  at  the  meeting  at  which  a 
substituted  contract  was  expresslv  authorized  with  a  construction 
company.     Hardy  v.  Carter,  163  S.^V.  1003  (Tex.). 

"  Lawler  v.  Murphy,  58  Conn.  294,  313,  20  Atl.  457  (benefit  asso- 
ciation ) . 

"  Heath  V.  GosUn,  SO  Mo.  310,  314. 

»«  Liglifbourne  i-.  WaLsh,  89  N.  Y.  S.  856,  97  App.  Div.  187.  So 
where  I  he  plaintiff  in  fact  knew  at  the  time  he  performed  services  for  the 
association,  that  its  members  with  whom  he  contracted  intended  not 

280 


Chap.  V]  LIABILITY   OF   MEMBERS  [§  64 

are  held  individually  liable  only  after  the  joint  assets 
are  exhausted. ^^  Liability  of  a  member  once  incurred 
is  not  terminated  by  withdrawal  from  the  association.^^ 
In  two  recent  trade  union  cases  it  has  been  held  that  a 
contract  made  by  the  association  is  binding  on  individ- 
ual members  on  the  theory  that  it  was  made  by  impli- 

to  become  personally  liable,  but  that  he  be  paid  out  of  the  association's 
funds,  he  cannot  hold  them  individually.  Attorney  defending  patent 
suits.  Burt  V.  Lathrop,  52  Mich.  106,  17  N.  W.  716;  McCabe  v. 
Goodfellow,  133  N.  Y.  89,  95,  30  N.  E.  728  (reversing  15  N.  Y.  S. 
377)  (attorney  prosecuting  for  a  "Law  and  Order"  league);  Jones 
V.  Hope,  3  T.  L.  R.  247,  note  (C.  of  App.)  (solicitor  for  a  volunteer 
corps). 

The  rule  apphes  even  when  the  defendant  is  the  contracting  member. 

Plaintiff  sued  defendant  for  repairs  on  a  steamer  which  defendant  had 
bought  for  the  purpose  of  turning  it  over  to  an  association  being  formed 
of  which  plaintiff  and  defendant  were  to  be  members.  Held:  Defend- 
ant was  personally  Hable  for  the  contract  unless  by  agreement  the  plain- 
tiff was  to  look  to  the  association  for  payment.  It  is  immaterial  for 
whose  benefit  it  was  intended.    Wells  v.  Turner,  16  Md.  133,  143. 

A  contract  of  a  Baptist  congregation  with  its  minister  construed  to 
be  a  contract  payable  only  out  of  a  fund  to  be  raised  by  voluntary  con-  . 
tributions.    Evidence  of  the  custom  of  Baptist  chvu'ches  known  to  the 
plaintiff  was  properly  admitted.    Riffe  v.  Proctor,  99  Mo.  App.  601,  609, 
74  S.  W.  409. 

Individual  members  of  an  Odd  Fellows  Lodge  are  not  liable  to  a 
fellow  member  for  sick  benefits,  for  the  constitution  and  by-laws  show 
that  the  payments  are  to  be  made  by  the  lodge,  not  by  its  members. 
Myers  v.  Jenkins,  63  Ohio  St.  101,  116,  57  N.  E.  1089. 

Defendant  signed  note  as  trustee  of  a  rehgious  society  for  a  loan 
secured  on  specific  property,  the  intention  being  that  that  property 
alone  should  be  Uable.  Held:  Defendant  not  personally  hable,  though 
it  was  not  a  corporation.  ElweU  v.  Tatmn,  6  Tex.  Civ.  App.  397,'401,  24 
S.W.  71,25  S.W.  434. 

By  statute  in  Pennsylvania  members  are  not  hable  individually,  but 
in  an  action  against  some  in  the  name  of  the  whole,  they  will  be  ordered 
to  see  claim  paid  out  of  the  treasury.  Wolfe  v.  Limestone  Council,  233 
Pa.  St.  357,  82  Atl.  499. 

A  member  of  a  committee  to  organize  a  raih'oad  was  sued  by  a  sur- 
veyor employed  by  the  committee  with  the  approval  of  the  defendant  for 
pay  for  his  services.  There  was  a  verdict  for  the  defendant.  Held: 
Properly  left  to  the  jury  to  decide  whether  under  all  the  circumstances 
the  agi-eement  was  that  credit  be  given  to  the  defendant  or  only  to  a 
fund  to  be  raised.  If  the  latter  and  the  fund  was  raised,  the  agreement 
became  absolute  and  the  defendant  would  be  hable.  Higgins  v.  Hop- 
kins, 3  Ex.  162,  167.    See  Landman  v.  Entwhistle,  7  Ex.  632. 

17  Patch  Mfg.  Co.  V.  Capeless,  79  Vt.  1,  63  Atl.  938. 

18  Sizer  v.  Daniels,  66  Barb.  426,  433  (pohtical  committee). 

281 


§  64]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

cation  a  term  of  the  contract  of  employment  of  each  in- 
dividual member.^^  Members  of  an  association  are  not 
liable  for  the  torts  of  a  fellow  member  unless  he  had 
general  authority  to  represent  them  in  the  matter.^" 

1^  The  International  Typothetae  made  a  contract  with  the  Inter- 
national Pressman's  Union  covering  relations  of  members,  strikes,  hours, 
etc.  Both  unincorporated  and  representing  local  unincorporated  asso- 
ciations. Action  by  individual  members  of  local  of  former  against  offi- 
cers of  Ohio  Union.  Minority  of  Union  did  not  approve  of  this  contro- 
versy. Not  all  members  of  Union  work  for  members  of  Tj-pothetae  or 
vice  versa.  Dictum,  that  contract  though  in  form  made  bj^  two  inter- 
national bodies  was  reaUy  a  contract  between  each  member  of  a  local 
of  the  TjTJothetae  who  had  members  of  the  Union  in  his  employ  and 
those  members,  so  that  it  became  the  terms  of  the  separate  contracts  of 
emplojTnent.  AH  members  of  TjT^othetae  not  indispensable  parties. 
But  contract  invalid  for  lack  of  authority  or  ratification  by  Union  of  acts 
of  its  officers.    Barnes  v.  Berry,  169  Fed.  225,  22S,  94  C.  C.  A.  501. 

An  agreement  between  a  railroad  and  a  union  fLxing  runs  and  rates 
of  pay  to  be  in  force  two  years  is  a  usage  and  not  a  contract.  As  such  it 
becomes  an  imphed  term  of  the  contract  of  emplojTnent  of  a  workman. 
There  was  nothing  in  it  about  the  period  of  service  of  emploj^ees,  and  so 
that  period  would  be  indefinite  and  could  be  terminated  bj^  either  party 
at  any  time.  Hence  discharged  employee  cannot  recover  for  loss  of 
time  after  his  discharge.    Hudson  v.  V.  N.  O.,  etc.  Ry.,  152  Ky.  711,  718. 

But  see  contra,  Hudson  v.  Cincinnati  Co.,  152  Ky.  711,  154  S.  W.  47. 
A  miners'  imion  not  being  a  business  enterprise  cannot  bind  individual 
members  by  agreement  with  operators  respecting  performance  of  work 
and  time  and  manner  of  pajonent.  Bumetta  v.  Marceline  Co.,  180  Mo. 
241,  79  S.  W.  136. 

Members  of  emplo jeers'  association  sue  union  for  not  suppljdng 
union  help  according  to  a  contract  under  seal  between  the  two  associa- 
tions. Held:  Doubtful  if  states  cause  of  action  and  whether  members 
can  sue.  If  agreement  under  seal,  the  members  certainly  could  not 
bring  any  action  on  it.  Barzilay  v.  Loewenthal,  119  N.  Y.  S.  612,  134 
App.  Div.  502. 

*"  Hence  defendant  was  Uable  as  surety  on  a  bond  for  a  Masonic  lodge 
that  he  signed  in  consequence  of  false  representations  of  a  member. 
Sewall  V.  Breathitt  Lodge,  150  Ky.  542,  545,  150  S.  W.  677. 

A  declaration  in  libel  against  members  of  a  merchants'  association  for 
blackli.sting  him  as  owing  it  $3.38  held  not  demurrable.  No  discussion 
of  i>rinciplcs  of  a.ssociation.    White  v.  Parks,  93  Ga.  033,  20  S.  E.  78. 

Defendant  joined  a  so-called  protective  association  which  sent  series 
of  letters  to  debtors  threatening  to  jjuljlish  their  names  in  a  book  to  be 
distributed  to  members.  Envelope  said  it  was  association  for  collection 
of  bad  debts.  Defendant  sent  first  letter  in  system  and  ])laintiff  and 
various  local  and  central  ag<'nts  or  officers  then  sent  others  of  the  series. 
Held:  Libfjlous  and  not  ])rivil('ged.  Real  object  of  association  w:is  col- 
lection by  threats,  not  i)rotection.  (No  discussion  of  association's  lia- 
bility.    Probably  defendant  would  be  liable  on  principle  of  agency.) 

282 


Chap.  V]  LIABILITY   OF   MEMBERS  [§  64 

They  have  been  held  Hable  for  neghgence  of  an  agent 
whom  they  placed  in  charge  of  then-  premises  whether 
they  knew  of  his  specific  act  or  not.^^  Where  an  asso- 
ciation knowingly  took  over  property  which  had  been 
cleared  of  liens  by  credit  given  by  the  plaintiff  and 
others,  the  association  was  held  to  have  taken  it  subject 
to  such  claims. ^^ 

The  nature  of  the  obligation  of  an  unincorporated 
benefit  society  to  its  members  when  no  certificate  de- 
fining the  obligation  or  other  written  instrument  is 
issued  was  considered  at  length  by  Chief  Justice  Shaw 
in  an  action  to  recover  a  funeral  benefit  of  130  brought 
by  the  next  of  kin  of  a  deceased  member  of  an  unincor- 
porated lodge  of  Odd  Fellows  against  certain  of  the 
members  of  the  lodge.  The  lodge  was  but  a  compo- 
nent part  of  another  aggregation  of  individuals  called 
the  "Grand  Lodge"  to  whom,  by  the  same  voluntary 
agreement,  the  whole  of  the  funds  of  the  subordinate 
lodge  might  at  any  time  be  forfeited.  In  his  opinion  he 
said:  Even  if  the  lodge  stood  alone,  "still  the  difficulty 
presents  itself  of  a  suit  for  thirty  dollars,  upon  the  joint 
promise  of,  say  sixty  persons,  constituting  a  voluntary 
association  of  individuals,  perpetually  changing  by  the 
retirement  of  members  and  the  admission  of  others. 
Shall  the  same  sixty  individuals,  who  constituted  the 

Muetze  v.  Tuteur,  77  Wis.  236,  46  N.  W.  123,  20  Am.  St.  Rep.  115,  9 
L.  R.  A.86. 

21  Plaintiff  sues  for  suffering  and  death  of  husband  by  attack  of  a 
bear  escaped  from  gi'ounds  of  club  of  which  defendants  were  members 
where  he  was  being  kept  as  a  prize.  One  defendant,  president  of  the 
club,  did  not  know  he  was  there.  Held :  The  club  was  not  properly  in- 
corporated and  so  is  a  voluntary  association.  The  members  of  the  club 
employed  agents  in  charge  of  the  premises  and  were  liable  for  his  acts 
whether  they  knew  about  them  or  not.  Dissent  as  to  the  defendant  who 
did  not  know  about  it.    Vredenburg  v.  Behan,  33  La.  Ann.  627,  640,  645. 

22  Hosman  v.  Kinneally,  90  N.  Y.  S.  357,  45  Misc.  411  (association 
sued  under  statute). 

283 


§  64]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

lodge  when  the  impUed  promise  took  effect,  be  sued, 
though  they  have  ceased  to  be  members?  If  not,  how 
can  the  residue  be  held  upon  a  joint  promise?  Or  shall 
those  be  sued  who  were  not  members  when  the  implied 
promise  took  effect,  but  who  have  become  such  when 
the  action  is  brought?  If  so,  what  joint  promise  of 
those  who  have  since  come  in  can  be  proved  by  the 
evidence? 

''But  without  encountering  these  difficulties, we  think 
there  are  two  plain  legal  grounds  upon  which  it  may  be 
held  that  this  action  cannot  be  maintained. 

''1.  The  constitution  and  bj-laws  of  the  lodge,  treat- 
ing them  as  articles  of  a  voluntary  association,  do  not 
amount  to  a  promise  to  each  member  by  all  the  rest,  to 
pay  him  an>i;liing.  The  stipulation  in  the  by-laws  is 
that,  on  the  death  of  each  member,  there  shall  be  al- 
lowed from  the  lodge  a  sum  not  less  than  thirt}^  dollars, 
to  defray  the  expense  of  burial,  to  be  paid  wdthout  de- 
lay to  the  deceased's  nearest  of  kin.  The  payment  is 
for  that  purpose.  It  is,  if  any  promise  at  all,  a  promise 
by  each  member  to  contribute,  by  periodical  and  other 
payments,  towards  a  certain  fund,  for  all  the  purposes 
contemplated  by  the  association,  including  money  to 
be  paid  promptly  for  the  expenses  of  burial,  to  be  done 
usually  before  letters  testamentary,  in  case  of  a  will,  or 
letters  of  administration,  in  case  of  intestacy,  can  be 
regularly  issued.  In  other  words,  the  promise  of  each 
member  is  to  pay  money  to  the  lodge;  and  the  lodge, 
not  being  incorporated,  can  maintain  no  suit.  If  it 
creates  any  right  which  can  be  recognized  by  law,  it  is 
an  equitable  right  only  to  a  share  in  a  common  fund, 
raised  either  for  purposes  purely  charitable,  or  for  their 
joint  benefit,  and  can  only  be  enforced  in  equity.    And 

284 


Chap.  V]  LIABILITY  OF   MEMBERS  [§  65 

if  there  were  any  ground  for  such  equitable  rehef ,  as  in 
case  of  partners  in  a  joint  fund,  raised  for  a  specific  pur- 
pose, of  which  we  give  no  intimation,  such  equitable 
relief  could  be  sought  only  by  a  member  or  his  legal 
representative. 

''2.  But  supposing  this  stipulation  in  the  constitu- 
tion and  by-laws  of  the  lodge,  to  amount  to  an  express 
promise  to  pay  thirty  dollars  upon  a  certain  contin- 
gency, there  is  no  consideration  for  such  promise  mov- 
ing from  the  plaintiff  to  the  defendants,  or  from  any 
person  acting  in  privity  with  him  or  acting  for  his  use 
or  benefit,  or  with  an  intent  and  purpose  to  obtain  a 
benefit  to  the  plaintiff.  There  is  no  ground  to  infer, 
from  the  facts  agreed,  that  the  son,  who  was  a  member 
of  the  lodge,  in  paying  his  contributions  thereto,  had 
any  purpose  of  obtaining  money  from  the  lodge,  in 
case  of  his  death,  for  the  use  of  his  father,  or  other  next 
of  kin,  for  his  own  benefit ;  to  whomsoever  it  might  be 
paid,  under  these  provisions,  it  was  a  naked  trust,  for 
defraying  the  charges  of  his  burial.  It  is,  therefore, 
not  at  all  analogous  to  the  case,  where  A  owes  B  and  B 
owes  C,  and  in  consideration  that  B  will  release  A,  he 
promises  to  pay  C.  Such  promise  is  valid,  and  C  may 
sue  A  upon  it.  The  reason  is,  that  although  the  con- 
sideration for  A's  promise  to  C  does  not  move  from  C, 
it  moves  from  A  for  C's  use  and  benefit."  ^^ 

§  65.  Liability  of  Members  of  Associations  of  Employers 
and  of  Employees 

In  considering  the  liability  of  non-profit  associa- 
tions and  their  members  for  torts,  one  naturally  thinks 
of  the  litigation  that  has  growm  out  of  modern  combina- 

23  Payne  v.  Snow,  12  Cush.  443,  445. 
285 


§  65]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

tions  of  employers  and  employees.  A  thorough  con- 
sideration of  these  cases,  however,  involves  analysis  of 
the  law  of  monopoly,  competition  and  mifair  trade 
which  is  beyond  the  scope  of  this  treatise.  It  is,  more- 
over, not  strictly  a  part  of  the  law  of  associations,  for 
although  in  almost  every  case  an  association  either  of 
employers  or  of  employees  was  involved,  the  princi- 
ples of  law  upon  which  the  case  turned  would  have 
been  as  applicable  to  an  unorganized  combination  of 
individuals  as  to  an  organized  association.  For  these 
reasons  only  an  outline  of  the  cases  will  be  attempted.^ 
These  cases  arise  where  economic  pressure  is  brought  to 
bear  by  a  group  for  its  own  benefit  against  some  other 
group  or  individual  members  of  that  other  group. 
Obviously  acts  which  when  done  by  isolated  individuals 
are  harmless,  become  seriously  damaging  when  done  in 
concert  by  an  association. ^ 

Prima  facie  any  damage  intentionally  caused  by  one 
man  to  another  is  tortious  unless  it  is  justified  by  the 
occasion.^  So  in  the  warfare  of  competition  by  combi- 
nations, both  as  regards  true  competitors  and  as  re- 
gards the  other  necessary  element  of  business  enter- 
prise, capital  or  labor  as  the  case  may  be,  the  issue  is 
whether  or  not  the  courts  recognize  as  a  justification 
for  the  damage  caused  by  the  combination  the  immedi- 
ate purpose  of  the  acts  complained  of.* 

*  For  a  detailed  anah^sis  of  the  cases,  see  "Crucial  Issues  in  Labor 
Litigation,"  by  Jeremiah  Smith,  in  20  Harvard  Law  Review,  253,  345, 
429,  and  "Competition  and  the  Law,"  by  Bruce  Wyman,  17  Green  Bag 
210. 

2  Pickett  V.  Walsh,  192  Mass.  572,  78  N.  E.  753. 
'  Bowen,  L.  J.,  in  Skinner  v.  Shew,  (1893)  1  Ch.  413,  422;  Hohnes,  J., 
in  Aikens  v.  Wiscon.sin,  195  U.  S.  194,  204,  49  L.  ed.  154,  25  S.  Ct.  3. 

*  Mogul  Co.  V.  McCregor,  23  Q.  B.  D.  598,  G13.  It  used  to  be  said 
that  an  !i.s.so(;iation  became  lawful  or  unlawful  a(;cording  to  the  means 
employed  to  attain  its  end.    Comm.  v.  Hunt,  4  Met.  111. 

It  i.s  of  course  true  that  illegal  acts,  euch  as  violence  in  the  midst  of  a 

286 


Chap.  V]  LIABILITY   OF   MEMBERS  [§  65 

The  justification  usually  recognized  for  the  damage 
caused  by  pressure  exerted  by  associations  is  a  direct 
competitive  financial  or  business  interest  of  the  defend- 
ant to  be  advanced  by  the  act  in  question.  Thus  strikes 
for  increased  wages  or  better  working  conditions  are 
legal. ^  But  a  strike  to  advance  the  private  interests 
of  an  individual  is  unlawful.*^  So  a  strike  to  force  the 
plaintiff  to  join  the  union  by  compelling  the  plaintiff's 
employer  to  discharge  him  is  illegal. '^  It  has  been  held 
that  though  the  purpose  of  a  labor  union  to  raise  wages 
of  its  members  is  lawful,  the  purpose  of  a  druggists' 
association  to  raise  prices  by  controlling  and  restrain- 

legal  strike,  wiU  render  those  responsible  for  it  liable  in  damages  and 
will  be  enjoined.  That,  however,  is  a  problem  of  the  law  of  torts  by  in- 
dividuals. The  association  is  not  a  necessary  element  of  it.  The  ques- 
tions of  the  law  of  conspiracy  come  nearer  to  our  subject.  Thus  it  was 
held  that  an  organization  for  the  propagation  of  theories  involving  the 
present  social  system  and  division  of  property  became  an  unlawful  con- 
spiracy if  it  advocated  violent  means  or  provided  for  driUing  of  troops 
in  violation  of  the  mihtia  law.  Spies  v.  People,  122  lU.  1,  12  N.  Yj. 
865. 

5  Iron  Molders  Union  v.  AUis-Chahners  Co.,  166  Fed.  45  (C.  C.  A. 
—  Wis.);  Mitchell  v.  Hitchman  Co.,  214  Fed.  685  (C.  C.  A.  —  W.  Va.); 
Lohse  V.  Fuelle,  215  Mo.  421,  114  S.  W.  997. 

A  combination  of  employers  to  meet  a  union  demand  for  higher 
wages  is  legal,  since  not  to  lower  but  maintain  prices.  Cote  v.  Murphy, 
159  Pa.  420,  28  Atl.  190. 

The  power  of  the  union  cannot  properly  be  used  simply  to  make  the 
plaintiff  pay  a  debt.  Giblan  v.  National,  etc.  Union,  (1903)  2  K.  B. 
600.    See  Webb  v.  Drake,  52  La.  Ann.  290,  26  So.  791. 

A  strike  to  prevent  the  use  of  helpers  by  employees  engaged  in  piece 
work  and  thus  diminishing  the  amount  of  work  available  for  the  strikers 
in  dull  seasons  is  justifiable.  Minasian  v.  Osborne,  210  Mass.  250,  255, 
96  N.  E.  1031.  It  does  not  violate  the  Sherman  Act.  Munroe  v. 
Colored  Ass'n,  135  La.  893,  898,  66  So.  260. 

^  A  strike  to  force  an  employer  to  get  rid  of  the  plaintiff,  a  foreman, 
instituted  because  of  personal  hostility  of  one  Dacey  and  a  desire  to 
advance  his  private  interests  was  unlawful  and  plaintiff  may  recover 
damages  from  the  officers  and  members  of  the  union  though  the  dis- 
charge was  after  a  vote  of  all  employees,  union  and  non-union.  The 
plaintiff  may  recover  all  his  damages  arising  from  the  discharge  and 
the  inabihty  to  procure  employment  which  may  continue  indefinitely. 
Hanson  v.  Innes,  211  Mass.  305,  97  N.  E.  756. 

'  Fairbanks  v.  McDonald,  219  Mass.  291,  106  N.  E.  1000. 

287 


§  65]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

ing  trade  is  unlawful.^  It  is  further  generally  held  that 
the  conflict  of  financial  interest  must  exist  directly  be- 
tween those  who  exert  the  pressure  and  those  upon  whom 
it  is  exerted,  that  is,  that  pressure  through  third  par- 
ties not  personally  concerned  in  the  conflict,  such  as  the 
boycott,  is  illegal.^  Whether  the  strike  to  establish 
the  closed  shop  is  legal  is  more  difficult  of  solution  and 
the  courts  have  differed  on  it.^"    A  strike  by  bricklayers 

8  Rourke  v.  Elk  Drug  Co.,  77  N.  Y.  S.  373,  75  App.  Div.  145. 

9  Pickett  V.  Walsh,  192  Mass.  572,  78  N.  E.  753;  Burnham  v.  Dowd, 
217  Mass.  351,  104  N.  E.  841;  Branson  v.  I.  W.  W.,  30  Nev.  270,  294, 
95  Pac.  354. 

Unions  may  refuse  to  work  with  non-union  material.  Bossert  v. 
United  Brotherhood,  137  N.  Y.  S.  321,  77  Misc.  592.  But  a  strike 
against  the  use  of  goods  of  a  single  manufacturer  though  without  per- 
sonal hostihty  is  illegal.   Bossert  v.  Dhuy,  151  N.  Y.  S.  877  (App.  Div.). 

Bill  against  officers  of  a  national  trade  union  for  an  injunction 
against  boycott  of  open  shop  goods  of  plaintiff.  Held:  There  is  no 
right  of  action  for  this  at  common  law.  The  Sherman  Act  confines 
the  remedy  by  injunction  to  the  representatives  of  the  government. 
The  New  York  statute  makes  the  offense  a  misdemeanor  but  pre- 
scribes no  civil  remedies.  Hence  an  injunction  may  issue  since  there 
is  a  combination  to  do  an  act  made  unlawful  by  statute  and  by  unlaw- 
ful means.  A  persistent  campaign  to  unionize  the  plaintiff's  shop  has 
been  carried  on  and  they  have  suffered  in  a  different  way  from  the 
community  at  large.  Irving  v.  Neal,  209  Fed.  471,  479  (D.  C,  — 
N.  Y.). 

^°  It  was  held  illegal  by  the  majority  in  Plant  v.  Woods,  176  Mass. 
492,  57  N.  E.  1011  (but  with  a  striking  dissent  by  Holmes,  C.  J.),  and 
in  Berry  v.  Donovan,  188  Mass.  353,  74  N.  E.  603;  Erdman  v.  Mitchell, 
207  Pa.  St.  79,  56  Atl.  327;  Lucke  v.  Clothing,  etc.  Assembly,  77  Md. 
396,  26  Atl.  505. 

Labor  union.  Closed  shop  strike.  Bill  by  non-union  employees. 
Held:  "What  one  individual  may  lawfully  do,  a  combination  of  in- 
dividuals have  the  same  right  to  do  provided  they  have  no  unlawful 
purjjose  in  view"  (p.  223).  Courts  are  in  conflict  on  subject,  but 
Illinois  holds  closed  shop  purpose  lawful  (p.  225).  Unions  believe  it 
essential  to  success  of  their  organization.  Kemp  v.  Division  No.  241, 
255  111.  213,  99  N.  E.  389.  See  National  Ass'n  v.  Cumming,  170  N.  Y. 
315,  63  N.  E.  369. 

A  provision  in  by-laws  for  limitation  of  api)rentices  is  not  an  illegal 
purpose.    Snow  v.  Wheeler,  113  Mass.  179,  185. 

Unit(!d  Mine  W(jrkers  of  America  held  to  be  unlawful  organization 
be(;auH(;  of  its  ])Ui7)o.s<^  and  pi'actices,  viz.:  to  mono])olizc  labor  market, 
b<'r;auH(!  of  a  contract  it  had  made  with  rival  operators  in  another  field 
to  unionize!  West  Virginia  mines.  Hitchman  Coal  Co.  v.  Mitchell,  202 
Fed.  512  (D.  C.  —  VV.  Va.). 

288 


Chap.  V]  LIABILITY  OF  MEMBERS  [§  65 

to  control  the  "pointing"  work  on  the  building  they 
were  working  on  was  held  legal, ^^  As  in  the  boycott, 
the  pressure  is  exerted  through  a  third  party  not  di- 
rectly concerned  in  the  controversy  between  the  two 
groups  of  workmen.  Here  the  third  party  is  directly 
concerned  in  dealing  with  both  competitors,  and  in  cases 
arising  out  of  competition  between  employers  similar 
pressure  has  been  held  justifiable. ^^  When  the  pres- 
sure is  exerted  on  third  parties  not  directly  concerned 

11  Pickett  V.  Walsh,  192  Mass.  572,  589,  78  N.  E.  753. 

12  Mogul  Co.  V.  McGregor,  (1892)  A.  C.  25. 

An  association  of  retailers  may  agree  not  to  patronize  wholesalers 
who  sell  to  mail  order  houses  and  circulate  a  list  of  such.  Montgomery 
Ward  &  Co.  v.  South  Dak.  Ass'n,  150  Fed.  413  (C.  C.  —  S.  D.). 

An  association  of  fire  undei-writers  for  regulation  of  premiums,  pre- 
vention of  rebates,  compensation  of  agents  and  non-intercourse  with 
companies  not  members  was  held  not  an  illegal  conspiracy.  Conti- 
nental Ins.  Co.  V.  Board  of  Fire  Underwriters,  67  Fed.  310. 

An  association  of  keepers  of  sailors'  boarding  houses  designed  to 
control  the  business  of  shipping  seamen  is  a  legitimate  commercial 
device.     Bowen  v.  Matheson,  96  Mass.  499. 

An  employer's  blackhst  was  held  legal.  Bradley  v.  Pierson,  148 
Pa.  St.  502,  24  Atl.  65. 

But  a  hverymen's  association  that  prohibited  members  from  doing 
business  with  those  who  do  not  patronize  members  exclusively  was 
held  an  illegal  monopoly.  Gatzow  v.  Buening,  106  Wis.  1,  81  S.  W. 
1003. 

A  granite  manufacturing  association  had  a  by-law  imposing,  in 
effect,  a  fine  on  members  dealing  with  outsiders.  Held:  Though  the 
object  was  not  illegal,  viz.,  competition,  yet  coercion  by  fines  is  illegal 
and  the  defendant  is  hable  in  damages.  MarteU  v.  White,  185  Mass. 
255,  67  N.  E.  1085.    See  BoutweU  v.  Marr,  71  Vt.  1,  42  Atl.  607. 

An  agreement  between  employers  and  unions  restricting  competi- 
tion but  primarily  for  their  own  benefit  and  not  aimed  at  the  plaintiff 
is  not  illegal  conspiracy.  National  Fireproofing  Co.  v.  Mason's  Ass'n, 
169  Fed.  259  (C.  C.  A.  —  N.  Y.).  Contra,  Curran  v.  Galen,  22  N.  Y.  S. 
826,  2  Misc.  553. 

One  five  stock  exchange  adopted  rules  forbidding  members  to  trade 
with  non-members.  Members  of  a  rival  exchange  sued  members  of 
first  exchange,  alleging  conspiracy  to  boycott  and  monopohze.  Held: 
Mere  adoption  of  rules  does  not  constitute  a  cause  of  action  for  plaintiff. 
No  causal  connection  estabhshed.  The  rule  applies  only  to  the  members 
and  can  only  remotely  affect  outsiders.  Imphes  that  if  members  in 
fact  refused  to  trade  and  carried  out  the  rule  it  might  be  different. 
Downes  v.  Bennett,  63  Kan.  653,  661,  66  Pac.  623,  88  A.  S.  R.  256,  55 
L.  R.  A.  560. 

289 


§  65]  XOX-PROFIT  ASSOCL\TIOXS  [Chap.  V 

in  dealing  with  both  competitors  the  pressure  exerted 
is  generally  held  illegal. ^^ 

In  most  of  these  cases  the  litigation  is  between  the 
individual  damaged  and  members  of  the  association  as 
representatives  of  the  whole  and  an  injunction  is 
sought  against  all  members  of  the  association.^^  In 
some  cases  individual  members  of  the  association  are 
sued  to  recover  damages  suffered  from  the  acts  com- 
plained of.^^     It  is  often  exceedingh'  difficult  to  pro- 

1^  Loewe  i'.  California,  etc.  Federation,  139  Fed.  71;  Beck  v.  Railway 
Teamsters,  118  Mich.  497,  77  X.  W.  13;  Barr  v.  Essex  Trades  Council, 
.53  X.  J.  Eq.  101,  30  Atl.  881. 

By-laws  of  an  association  to  prevent  wholesalers  seUing  to  outsiders 
pro\'ided  for  a  claim  by  members  against  such  wholesalers  and  re- 
quired members  to  boycott.  Held:  A  dealer  could  enjoin  a  member 
from  making  such  claim.  Jackson  v.  Stanfield,  137  Ind.  592,  36  X.  E. 
345. 

But  a  wholesaler  was  held  to  have  no  action  against  the  secretary 
for  threatening  to  send  a  notice  of  boj'cott.  Bohn  Mfg.  Co.  v.  HoUis, 
54  Minn.  223,  55  X.  W.  1119. 

Boycott  illegal  though  the  ultimate  object  was  to  benefit  a  union 
emploved  bv  the  manufacturer  bovcotted.  Am.  Fed.  of  Labor  v. 
Buck's  Stove  Co.,  33  App.  D.  C.  83. ' 

Bricklaj-ers  may  not  strike  because  emplo5'er  employ's  on  another 
job  non-vmion  pointers.  Pickett  v.  Walsh,  192  Mass.  572,  587,  78  N.  E. 
753. 

"  L.  D.  Willcut  &  Son  Co.  v.  Bricklaj-ers'  Union,  200  Mass.  110, 
85  N.  E.  897;  Thomas  Russell  &  Sons  v.  Stampers',  etc.  Union,  107 
N.  Y.  S.  303.  Injunction  wiU  not  be  granted  on  e^^dence  merely  of 
misconduct  of  individuals.  Authorization  must  be  proved.  J.  T. 
Parkinson  Co.  v.  Building  Trades  Council,  154  Cal.  581,  98  Pac.  1027; 
Aluminum  Co.  r.  Local  Xo.  84,  197  Fed.  221. 

1*  A  demurrer  to  a  complaint  under  the  Sherman  Act  against  mem- 
bers of  a  union  for  conspiracy  to  boycott  was  overruled  (Danbvuy 
Hatters'  case).  Loewe  v.  Lawlor,  208  U.  S.  274,  52  L.  ed.  488,  28  S. 
Ct.  301;  Lawlor  v.  Loewe,  235  U.  S.  522,  535;  Hanson  v.  Innes,  211 
Mass.  301,  .305,  97  X.  E.  756. 

Tort  for  conspiracy.  Defendants  were  granite  manufacturers  and 
members  of  a  local  association  of  employers  affihated  with  a  Xew  Eng- 
land association.  This  association  passed  resolution  that  members 
should  trade  only  with  members.  By-laws  imposed  fine  for  vioLition 
of  any  rules.  They  had  tritxl  to  get  plaintiff  to  join  and  admitted  they 
pa.'vsed  vote  to  make  plaintiff  join.  Plaintiff's  business  destroyed. 
Held:  Defendants  liable.  The  penalty  made  the  rule  intimidation  of 
minority  by  majority.  Illegal  means  made  it  actionable  conspiracy. 
"When  the  will  of  the  majority  of  an  organized  body  in  matters  involv- 

290 


Chap.  V]  LIABILITY   OF   MEMBERS  [§  65 

duce  evidence  of  authorization  or  ratification  by  the 
defendants  of  the  acts  complained  of.^*^ 

ing  the  rights  of  outside  parties  is  enforced  upon  its  members  by  means 
of  fines  and  penalties  the  situation  is  essentially  the  same  as  when  unity 
of  action  is  secured  among  unorganized  individuals  by  threats  or  intimi- 
dation" (p.  8).  "The  voluntary  acceptance  of  by-laws  providing  for 
the  imposition  of  coercive  fines  does  not  make  them  legal  and  collectible 
and  the  standing  threat  of  their  imposition  may  properly  be  classed 
with  the  ordinary  threat  of  suits  upon  groundless  claims.  The  fact  that 
the  relations  and  processes  deemed  essential  to  a  recovery  are  brought 
within  the  membership  and  proceedings  of  an  organized  body,  cannot 
change  the  result.  The  law  sees  in  the  membership  of  an  association  of 
this  character  both  the  authors  of  its  coercive  system  and  the  victims 
of  its  unlawful  pressure.  If  this  were  not  so,  men  could  deprive  their 
fellows  of  estabUshed  rights  simply  by  working  through  an  association" 
(p.  9).  "It  is  clear  that  the  law  cannot  concede  to  organizations  of 
this  character  the  powers  and  immunities  claimed  for  theii-  association 
by  these  defendants  and  retain  its  own  power  to  protect  the  individual 
citizen  in  the  free  enjoyment  of  his  capital  or  labor"  (p.  10).  Boutwell 
V.  Marr,  71  Vt.  1,  42  Atl.  607,  76  Am.  St.  Rep.  746,  43  L.  R.  A.  803. 

Tort  for  conspiracy  brought  against  members  of  labor  union  for  de- 
priving plaintiff  of  hearse  at  funeral.  Held:  Illegal  combination  in 
restraint  of  trade.  Does  not  matter  what  expressed  purposes  of  organ- 
ization are  if  this  act  of  theirs  was  unlawful.  If  the  combination  is  un- 
lawful, it  is  none  the  less  so  because  it  is  in  the  form  of  an  association. 
Gatzow  V.  Buening,  106  Wis.  1,  14,  81  N.  W.  1003,  80  Am.  St.  Rep.  17, 
49  L.  R.  A.  475. 

Action  of  conspiracy  against  labor  union  for  strike  to  enforce  closed 
shop  held  maintainable  and  damages  collectible  from  members  "so  im- 
phcated  as  to  be  responsible  for  what  they  helped  to  set  in  motion  or 
helped  on."    Roofing  Co.  v.  Jose,  12  Ont.  L.  R.  200. 

1^  Should  have  submitted  to  jury  whether  evidence  proved  individual 
defendants  authorized  acts  of  agents  of  union.  Mere  payment  of  dues 
even  after  suit  started  was  incompetent  evidence.  Fact  that  union  had 
clause  in  constitution  that  officers  shall  use  all  means  in  power  to  union- 
ize shops  is  not  enough  to  prove  assent  of  members  to  illegal  means  unless 
it  appears  that  with  the  knowledge  of  the  members  unlawful  means  had 
been  so  frequently  used  with  the  express  or  tacit  approval  of  the  associa- 
tion that  its  agents  were  warranted  in  assuming  that  they  might  use 
such  means  in  the  future  and  that  members  would  tolerate  it.  Lawlor 
V.  Loewe,  187  Fed.  522,  526  (C.  C.  A.  —  Conn.).  See  Hill  v.  Eagle  Co., 
219  Fed.  717  (C.  C.  A.  —  W.  Va.). 

In  the  final  appeal  of  the  Danbury  Hatters'  case  for  damages  under 
the  Sherman  Act  for  boycott,  the  court  said:  "The  court  in  substance 
instructed  the  jury  that  if  these  members  paid  their  dues  and  continued 
to  delegate  authority  to  their  officers  unlawfully  to  interfere  with  the 
plaintiff's  interstate  commerce  in  such  circumstances  that  they  knew  or 
ought  to  have  known  and  such  officers  were  warranted  in  the  behef  that 
they  were  acting  in  the  matter  within  their  delegated  authority,  then 
such  members  were  jointly  hable  and  no  others.     It  seems  to  us  that 

291 


§  65]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

An  action  was  brought  by  contractors  against  a  trade 
union  which  controlled  the  local  labor  market  in  its 
trade.  The  union  had  notified  him  of  its  wage  scale  and 
he  paid  it  to  his  employees.  The  union  lowered  its 
scale  without  notice  to  him  and  he  continued  to  pay 
the  old  scale.  He  sought  to  recover  the  difference  in 
wages  from  the  union,  joining  some  members  to  repre- 
sent all.  Ademurrer  was  overruled.  The  court  said  that 
though  he  had  no  contract  with  the  union,  the  relation 
established  by  its  monopoly  was  the  same  as  contract. 
Further  he  was  entitled  to  rely  on  its  representations. 
The  failure  to  notify  of  the  change  made  the  old  notice 
a  continuing  misrepresentation.^'' 

this  instruction  sufficiently  guarded  the  defendants'  rights  and  that  the 
defendants  got  all  that  they  were  entitled  to  ask  in  not  being  held  charge- 
able with  knowledge  as  matter  of  law.  It  is  a  tax  on  credulity  to  ask 
any  one  to  believe  that  members  of  labor  unions  at  that  time  did  not 
know  that  the  primary  and  secondary  boycott  and  the  use  of  the  '  We 
don't  patronize'  or  'Unfau-'  hst  were  means  expected  to  be  employed 
in  the  effort  to  unionize  shops."  Lawlor  v.  Loewe,  235  U.  S.  522, 
535. 

If  an  agreement  not  to  work  on  non-union  trim  enforceable  by  fine 
is  unlawful,  defendants  are  hable  for  anything  done  to  carry  it  out  even 
if  they  did  not  participate,  for  the  agreement  is  part  of  the  organic  law 
of  the  association.    Irving  v.  Neal,  209  Fed.  471,  476  (D.  C.  —  N.  Y.). 

Prosecution  of  founder  of  a  so-called  labor  union  alleged  to  be  a  trea- 
sonable conspiracy.  Held:  Evidence  of  acts  of  defendant  while  he  was 
president  did  not  prove  that  he  acted  under  instructions  from  the  asso- 
ciation or  that  the  association  was  formed  for  the  purpose  of  committing 
those  acts.  The  fact  that  the  founder  of  an  association  may  have  had 
an  illegal  purpose  in  view  does  not  make  association  illegal  under  the 
penal  code.    U.  S.  v.  Gomez,  8  Philippine  630,  651. 

Cannot  enjoin  for  acts  of  delegates  as  individuals  where  union  and 
members  took  no  part  in  the  strike.  Pickett  v.  Walsh,  192  Mass.  572, 
589,  78  N.  E.  753. 

Ratification  of  violence  by  a  trade  union  may  be  proved  by  circum- 
stant  ial  evidence  but  an  allegation  of  con.spiracy  rcqub'es  direct  proof. 
Thoma,s  Rus.s(!ll  &  Son  v.  Stampers'  Union,  107  N.  Y.  S.  303. 

Wh(;re  labor  lodges  maintained  strikes  of  members  by  money  contri- 
l)Ul  ions  to  KUi)j)ort  strikers  and  ])ick(!ters  and  the  use  of  abusive  epithets 
was  oj)en  and  nolorioiis  during  tlu^  strike  t hey  are  liable  as  having  aided 
and  abetted  hik^Ii  iiii.sconduct.  Jones  v.  Maher,  116  N.  Y.  S.  180,  aff'd 
125  N.  Y.  S.  112(i,  141  Ai)p.  Div.  919. 

"  Powers  V.  Journcym(!n,  172  S.  W.  284  (Tenn.). 

2!)2 


Chap.  V]  RIGHTS  OF  CREDITORS  [§  66 

Plaintiff  had  a  contract  for  musicians  with  a  union. 
He  did  not  Uke  the  ones  they  furnished  and  desired  to 
employ  other  members  of  the  union  who  were  willing 
to  work  but  feared  fines  and  expulsion  if  they  did  so. 
The  court  refused  an  injunction.  He  voluntarily 
made  a  contract  and  must  abide  by  the  union  rules. ^^ 


§  66.  Rights  of  Creditors  to  Reach  the  Funds  of  the 
Association 

It  is  a  different  question  whether  the  funds  of  the 
association  are  liable  for  the  contracts  and  torts  of  the 
association,  and  if  so,  how  they  can  be  reached.  It  is 
generally  held  that  for  contracts  of  the  association  its 
funds  can  be  reached  in  a  representative  proceeding  in 
equity,^  and  only  in  such  proceedings.^  When  the  con- 
tract was  made  by  trustees  of  the  funds  of  the  associa- 

18  Rhodes  Bros.  Co.  v.  Musicians'  Union,  92  St.  641  (R.  I.). 

1  Van  Houten  v.  Pine,  36  N.  J.  Eq.  133,  137  (benefit  society). 
Pastor  of  a  Catholic  church  borrowed  money  of  plaintiff  and  others 

upon  written  contracts  of  repayment  in  the  fonn  of  deposit  books  in 
the  name  of  the  church.  The  money  was  mingled  with  the  general  ' 
church  revenues  and  used  to  pay  its  expenses  and  debts  and  to  ac- 
quire property.  In  an  action  against  the  bishop  on  these  contracts  the 
court  said :  "  It  cannot  be  assumed  that  the  plaintiff  could  not  have  given 
credit  to  the  fund.  The  fund  would  have  been  the  ultimate  resort  for 
payment  had  the  church  been  incorporated  under  the  statute  or  had 
the  deposits  been  in  an  incoiporated  savings  bank,  and  it  is  not  neces- 
sary that  there  should  have  been  any  personal  habiUty  on  the  contract 
in  order  that  there  should  be  a  remedy  against  the  fund."  Leahy  v.  Wil- 
liams, 141  Mass.  345,  357,  6  N.  E.  78. 

Held :  That  a  social  club  though  without  constitution  or  by-laws  and 
without  pm-pose  of  pecuniary  profit  or  advantage  ought  to  be  liable 
under  the  New  York  statute  as  a  joint  stock  association.  In  an  action 
against  the  president  as  such  for  a  purchase  made  by  him  while  acting  as 
a  committee  of  the  club,  the  question  should  have  been  submitted  to 
the  jury  whether  credit  was  given  to  the  club  or  not.  (Disapproving 
Park  V.  Spaulding,  10  Hun  128).  Ebbinghousen  v.  Worth  Club,  4  Abb. 
N.  C.  (N.  Y.)  300. 

2  Moore  v.  Stemmons,  119  Mo.  App.  162,  166,  95  S.  W.  313  (trus- 
tees of  church);  Fletcher  v.  Tribe,  9  Pa.  Sup.  Ct.  393,  397  (benefit  soci- 
ety); see  Maisch  v.  O.  A.,  223  Pa.  St.  199,  200,  72  Atl.  528. 

293 


§  66]  XOX-PROFIT  ASSOCL\TIOXS  [Chap.  V 

tion  in  their  capacity  as  trustees,  upon  well-established 
principles  of  the  law  of  trusts,  the  plaintiff  can  reach  and 
apply  in  pajTaent  of  his  debt  the  trust  fund  b}'  proper 
proceedings  in  equity.^  In  one  case  it  was  held  that 
the  fund  could  be  reached  without  the  aid  of  a  bill  in 
equit3\^    Apparently  the  same  result  has  been  attained 

'  Bill  in  equitj'  on  promissory-  note  signed  by  two  of  three  trustees 
of  the  society  of  Shakers.  Held:  "The  society  was  not  a  partnership. 
Neither  was  it  a  corporation,  in  the  proper  sense  of  that  term.  The 
members  have  no  property,  haA-ing  renounced  all  to  the  societ}-.  It  is 
a  somewhat  anomalous  case,  but  is  yet  of  a  kind  that  occasionall}'  ap>- 
pears  in  the  books  of  reports  and  in  regard  to  which  the  law  has  been 
settled  bj-  a  nimaber  of  decisions."  Suit  against  individual  members 
would  be  good  only  against  those  sui  juris  and  not  dead.  Members 
have  no  private  property  for  satisfaction  of  a  judgment  (p.  737).  "The 
note  was  not  eflfectual  against  anj-thing  but  this  changing  bod}',  and 
that  only  bj'  supposing  it  to  be  intended  to  be  a  charge  against  the  prop- 
erty which  aU  the  members  of  the  society  had  concurred  in  putting  in  a 
common  name  in  the  hands  of  the  trustees  of  the  society"  (p.  738). 
Hence  created  equitable  Men,  so  it  is  not  a  mere  legal  Uabihty  on  which 
the  action  is  brought.  Though  signed  by  individuals  described  as  tnis- 
tees  of  the  society,  evidence  is  admissible  to  show  it  is  the  obhgation  of 
the  principal  and  not  the  agent  (p.  740).  Shaker  Soc.  v.  Watson,  68 
Fed.  730,  37  U.  S.  App.  141,  15  C.  C.  A.  632. 

A  debt  of  a  church  may  be  satisfied  out  of  property-  held  in  trust  for 
it  by  trustees  who  are  made  defendants.  The  debt  here  was  evidenced 
by  a  note  of  the  trustees  authorized  by  a  resolution  of  the  chiu"ch.  It 
appears  to  have  been  a  bill  in  equity.  Lyons  v.  Planters,  86  Ga.  485,  490, 
12  S.  E.  882.     (Quer^-  if  incorporated.) 

A  bill  in  equitj'  may  be  brought  by  a  creditor  of  a  church  against  its 
trustees  to  subject  its  propertv  to  pa\Tnent  of  his  debt.  Linn  v.  Carson, 
32  Gratt.  170,  183  (Ysl.). 

Trustees  of  an  \mincorporated  Methodist  church  had  authority  to 
mortgage  the  church  property  to  reimburse  themselves  for  advances. 
The  trustees  gave  their  personal  notes  to  the  plaintiff  for  money  loaned. 
He  brought  a  bill  in  equity  to  subject  the  church  property  to  paj-ment 
of  his  debt.  Held :  When  a  trustee  has  power  to  sell  or  mortgage,  equity 
will  enforce  a  sale  or  mortgage  to  secure  a  debt  contracted  within  his 
authority  (p.  668).  The  notes  here  were  recognized  for  a  time  as  bind- 
ing by  being  printed  in  the  list  of  the  debt  of  the  church.  The  fact  that 
the  trustees  did  not  add  the  designation  of  their  oflBce  did  not  affect 
their  rights  as  against  the  church  (p.  669).  The  trustees  arc  the  only 
neccssar>'  parties  defendant.  It  is  practically  impossible  to  bring  in  all 
the  beneficiaries  (p.  670).  It  is  immaterial  that  plaintiff  is  one  of  the 
trustees.    Bushong  v.  Taylor,  82  Mo.  660. 

*  In  an  action  of  contract  against  the  trustees  of  a  "Family  of 
Shakers,"  a  judgment  against  them  and  their  successors  in  oflBce 
would  be  valid,    and   would   be  satisfied   out  of   the  funds  of  the 

294 


Chap.  V]  RIGHTS   OF   CREDITORS  [§  66 

by  statute.^  Mechanics'  liens  on  the  property  of  the 
association  have  been  enforced  under  contracts  made 
by  a  trustee.^  It  is  not  yet  clear  if  the  property  of  the 
association  is  liable  for  the  torts  of  its  members/  but 
on  the  usual  principles  of  agency  it  should  be  liable  for 
torts  of  its  officers  in  the  course  of  acts  within  the  scope 

society  without  the  aid  of  a  bill  in  equity.  Davis  v.  Bradford,  58 
N.  H.  476,  4S0. 

*  Under  Georgia  code  a  proceeding  may  be  brought  to  subject  to  a 
debt  of  an  unincorporated  church  property  held  for  it  by  trustees.  The 
trustees  are  the  only  necessary  parties.  A  pastor  may  so  sue  for  pay- 
ment of  his  salary  and  for  the  value  of  rent  of  a  parsonage  he  claimed 
the  right  to  occupy  as  part  of  the  contract  for  his  services.  Kelsey  v. 
Jackson,  123  Ga.  113,  114,  50  S.  E,  951.  Ace.  on  first  point.  Josey  v. 
Union  Loan  &  Trust  Co.,  106  Ga.  608,  32  S.  E.  628. 

Where  an  unincorporated  church  used  for  two  years  a  piano  bought 
for  it  by  the  pastor,  it  shows  ratification  of  the  purchase  and  an  action 
may  be  brought  to  subject  the  property  held  by  its  trustees  for  the  debt. 
Smith  V.  Goode,  etc.  Co.,  68  S.  E.  620  (Ga.);  Bastrop  v.  Austin  Rice 
Growers'  Ass'n  v.  Cochran,  171  S.  W.  294  (Tex.)  (must  first  exhaust 
assets  of  association). 

^  Members  joining  a  church  authorize  its  trustee  to  act  to  the  ex- 
tent of  his  beneficial  interest  in  the  property  of  the  association  and  any 
debt  contracted  by  the  trustees  on  account  of  the  premises  will  be  the 
debt  of  the  members  to  the  extent  of  the  interest  held  by  the  trustees, 
and  a  mechanic's  hen  on  the  property  can  be  enforced.  Harrisburg  Co. 
V.  Washburn,  29  Ore.  150,  162,  44  Pac.  390. 

A  lien  cannot  be  enforced  against  the  property  of  a  church  in  an  ac- 
tion against  individuals  alleged  to  be  trustees  without  evidence  of  their 
authority  to  bind  the  church.    Owens  v.  Caraway,  110  S.  W.  474  (Tex.). 

Notice  of  a  lien  given  to  a  CathoUc  bishop  who  holds  as  trustee  for 
an  unincoi-porated  congregation  is  not  a  notice  to  the  real  owner  be- 
cause under  the  statute  of  Pennsylvania  he  holds  only  as  passive  trus- 
tee.   Carrick  v.  Conevin,  243  Pa.  283,  90  Atl.  147. 

A  majority  of  a  church  congregation  including  its  trustees  voted  to 
make  repairs  on  the  church,  expecting  to  raise  the  money  by  voluntary 
contributions.  The  plaintiff  did  the  work  under  contract  with  a  com- 
mittee appointed  by  the  church  for  that  purpose.  Held:  He  may  en- 
force a  mechanic's  hen  against  the  church  building,  naming  the  trustees 
as  defendants.  Gortemiller  v.  Rosengarn,  103  Ind.  414,  418,  2  N.  E. 
829. 

7  Elkington  v.  London  Ass'n,  (1911)  28  T.  L.  R.  117  (tort  for  libel 
but  words  held  not  libellous);  Brown  v.  Lewis,  12  T.  L.  R.  455  (tort 
against  committee  of  football  club  for  negligence  in  erecting  a  stand) ; 
Council  w.  United  Hatters,  74  Atl.  188  (N.  J.)  (tort  against  labor  union 
for  consequences  of  a  strike) ;  Ruddy  v.  United  Ass'n,  76  N.  J.  L.  467, 
75  Atl.  742  (tort  against  labor  union  for  maUcious  interference  with 
contract) . 

295 


§  67]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

of  their  authority.  Attempts  to  exempt  by  legisla- 
tion trade  unions  and  associations  of  employers  from 
liability  for  torts  of  their  members  committed  on  behalf 
of  the  association  will  doubtless  be  held  unconstitu- 
tional as  class  legislation.^ 

English  trade  unions  occupy  a  somewhat  different 
position  from  those  in  the  United  States.  At  common 
law  in  England  they  were  held  illegal  as  combinations 
in  restraint  of  trade.  By  statute  unions  that  register 
under  the  statute  have  been  legalized  for  some  pur- 
poses and  have  received  certain  rights  similar  4,0  those 
conferred  on  corporations.  In  the  Taff  Vale  case  it  was 
held  that  having  received  by  statute  corporate  privi- 
leges a  union  became  subject  also  to  like  responsibilities 
and  could  be  enjoined  in  its  association  name  for  the 
torts  of  its  agents  and  the  funds  of  the  union  were  held 
liable  for  the  damage  caused.^  Before  the  Trade  Dis- 
putes Act  of  1906  the  funds  of  an  English  trade  union 
could  be  reached  by  a  plaintiff  damaged  by  a  libel  pub- 
lished by  the  union. ^°  If  the  funds  were  vested  in  trus- 
tees they  might  be  joined  as  defendants. ^^  Now  this 
can  be  done  only  if  the  act  was  not  in  contemplation  or 
furtherance  of  a  trade  dispute. ^^ 

§  67.   Powers  of  Officers 

Officers  of  non-profit  associations  have  not  the  im- 
plied authority  which  officers  of  business  associations 
would  have.^    They  clearly  have  no  power  to  transfer 

8  Opinion  of  the  Justices,  211  Mass.  618,  98  N.  E.  337. 
0  TufT  Vale  Ry.  Co.  v.  Amalgamated  Soc,  (1901)  A.  C.  426. 
i«  Linakcr  v.  Piloher,  70  L.  J.  K.  B.  396. 

"  South  Wal(!S  I-\«(loration  v.  Glamorgan  Co.,  (1905)  A.  C.  239. 
'2  Ric^lianls  v.  Bartram,  25  Timo.s  L.  li.  181. 

•  A  treasurer  of  an  unineoi7)orated  association  (Japanese  Farmers' 
Association)  has  no  imijlied  pow(!r  to  endorse  for  suit  notes  given  to  the 

290 


Chap.  V]  POWERS  OF  OFFICERS  [§  67 

all  the  property  of  the  association  to  another  organiza- 
tion. ^  Where  they  advance  money  to  buy  for  the  as- 
sociation property  which  they  were  authorized  to  buy 
they  have  a  lien  upon  it  for  their  reimbursement.^ 
They  are  subject  to  the  usual  fiduciary  obligations.^ 
But  a  treasurer,  sued  for  funds  which  he  got  together  to 
distribute  under  a  void  vote,  cannot  set  off  expenses 
incurred  in  preparing  to  carry  out  the  vote  or  in  de- 
association  as  penalty  for  breach  of  contract.  Nakegawa  v.  Okamoto, 
164  Cal.  718,  723,  130  Pac.  707. 

The  fact  that  one  R  was  trustee  for  a  lodge  was  not  of  itseK  sufficient 
from  which  to  infer  that  he  had  authority  to  make  a  contract  for  the 
sale  of  property  belonging  to  the  lodge.  (This  was  action  for  commis- 
sions.)   Castner  v.  Rinne,  31  Col.  256,  72  Pac.  1052. 

An  assignment  properly  drawn  and  executed  by  the  president  of  a 
corporation  and  having  its  seal  is  presumptively  authorized,  but  not  if 
it  is  an  unincorporated  association.  Not  a  partnership  and  must  prove 
authority  of  agent  from  individual  members.  Brower  v.  Crimmins,  121 
N.  Y.  S.  648,  67  Misc.  68. 

Although  the  deacons  of  an  unincorporated  church  were  by  statute 
given  limited  corporate  powers  to  take  property  in  succession,  they  have 
no  power  to  issue  notes  binding  their  successors  or  the  church  or  to  make 
executory  contracts.    Jefts  v.  York,  10  Cush.  392,  394. 

2  Rudolph  V.  Southern  Beneficial  League,  7  N.  Y.  S.  135,  739,  23  Abb. 
N.  Cas.  (N.  Y.)  199  (incorporation  of  benefit  society  by  executive 
board) . 

Property  of  an  unincorporated  association  is  not  transferred  to  a 
corporation  organized  by  its  officers  to  succeed  it  without  a  vote  of  the 
association.  Koprucki  v.  Wojenechowski,  130  N.  Y.  S.  736,  73  Misc. 
46. 

Trustees  for  a  church  held  under  a  deed  forbidding  them  to  sell  with- 
out "the  concurrence  of  two-thirds  of  the  membership  of  the  church 
for  the  time  being."  A  mortgage  of  the  church  was  given  to  one  who 
paid  off  its  debts  and  nine  years  later  was  foreclosed.  The  authority  to 
mortgage  was  disputed  by  heirs  of  a  surviv  ng  trustee.  The  congre- 
gation had  dispersed.  There  was  no  evidence  that  the  mortgage  was 
authorized  at  a  church  meeting,  but  all  witnesses  admitted  they  knew  of 
it  at  the  time.  Held:  It  was  ratified  by  their  acquiescence.  The  law 
presumes  that  eveiy  one  performs  his  duties.  After  a  long  lapse  of  time 
such  presumptions  may  be  indulged  to  supply  deficiencies  in  a  title. 
McCalhster  v.  Ross,  155  Mo.  87,  94,  55  S.  W.  1027.  Ace.  Rountree  v. 
Blount,  129  N.  C.  25,  39  S.  E.  505. 

3  Minnett  v.  Lord  Talbot,  1  L.  R.  Ire.  143. 

^  A  lodge  may  recover  money  of  lodge  used  by  officer  to  pay  per- 
sonal debt  when  defendant  was  charged  with  notice  by  signature  of 
check  as  "Grand  Treas."  Washbon  v.  Hixon,  87  Kaii.  310,  124  Pac. 
366. 

297 


§  68]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

fending  a  suit  to  enjoin  distribution.-^  The  usual  rules 
regarding  tenure  of  office  ^  and  duties  ^  apply.  A 
Society  of  Shakers  was  held  estopped  to  deny  the 
authority  of  two  out  of  three  trustees  to  bind  it  in 
contract  because  that  had  long  been  its  custom.^ 

§  68.  Liability  of  OfiScers  and  Agents 

Liability  in  these  cases  depends  on  principles  of 
agency.  Hence  the  rule  that  when  the  principal  for 
whom  an  agent  pui'ports  to  act  is  not  liable,  the  agent 
may  be  held  personally,  has  been  applied  to  acts  by 
officers  and  committees  of  these  associations  without 
express  authorization  by  the  members.^  In  some  cases 
liability  is  put  on  the  ground  that  the  association,  the 
supposed  principal,  could  not  be  liable  as  such,  though 
the  members  individually  might.-    In  most  cases,  how- 

5  St.  Mary's  Benev.  Ass'n  v.  LMich,  64  N.  H.  213,  9  Atl. 
98. 

®  By-law  providing  for  election  of  physician  to  hold  office  "during 
pleasure  of  association"  authorizes  dismissal  at  any  regular  meeting  in 
absence  of  by-law  to  contrary-.  Brandon  v.  Worlev,  28  X.  Y.  S.  557,  8 
Misc.  (N.  Y.)  253,  59  X.  Y.  St.  237. 

^  Sureties  on  a  bond  given  by  a  treasurer  of  a  lodge,  an  unincorpo- 
rated association,  are  not  discharged  by  changes  in  membership  after 
execution  or  an  increase  involving  gi'eater  responsibihty.  AU  this  must 
have  been  contemplated  when  the  bond  was  given.  Coombs  v.  Har- 
ford, 99  Me.  426,  429,  59  Atl.  529. 

8  Shaker  Soc.  v.  Watson,  68  Fed.  730,  741  (C.  C.  A.). 

1  Caldicott  V.  Griffiths,  8  Exch.  898,  903,  23  L.  J.  Exch.  54  (trade 
association  to  get  information  about  legislation);  Osborne  v.  Dickey, 
71  S.  E.  763  (Ga.)  (committee  contracting  for  banquet);  Lewis  v. 
Tihon,  64  la.  220,  19  X.  W.  911  (landlord  suing  a  club);  Comfort  v. 
Graham,  87  la.  295,  298,  54  X.  \V.  242  (ditto);  Riffe  v.  Proctor,  99  Mo. 
App.  601,  608,  74  S.  W.  409  (church);  Bartholomae  v.  Kauffman,  47 
N.  Y.  Super.  Ct.  552,  aff'd  91  N.  Y.  654  (agent  purporting  to  sign  for 
tru8to(\s  of  an  association  when  there  were  no  trustees);  McCartee  v. 
Chambers,  6  Wend.  649  (committee  appointed  by  a  pubUc  meeting); 
Lincoln  v.  Cranflail,  21  Wend.  101  (committee  preceding  a  corporation); 
Frcflcnhall  v.  Taylor,  23  Wis.  538,  540,  aff'd  26  Wis.  286,  291  (committee 
of  an  a.s,sociation). 

*  Xationul  society  not  liable  for  services  of  a  State  organizer  em- 

298 


Chap.  V]     LIABILITY   OF  OFFICERS   AND   AGENTS       [§  68 

ever,  liability  could  be  established  on  the  ground  that  the 
contracting  party  was  a  member  as  well  as  an  agent  of 
the  association.^  If  he  contracts  as  an  individual,  he 
is  personally  liable  unless  he  expressly  limits  his  liabil- 
ity.'* In  a  few  cases  the  coiu^t  appears  to  have  held  the 
member  contracting  not  personally  liable  because  he 
acted  as  agent. ^    It  is  probable  that  these  cases  could 

ployed  by  unincorporated  State  society.  Crawley  v.  Am.  Soc.  of  Equity, 
153  Wis.  13,  18,  139  N.  W.  734. 

^  CuUen  V.  Queensbury,  1  Bro.  Ch.  101  (committee  of  club);  Rob- 
inson V.  Robinson,  10  Me.  240,  243  (agent  of  meeting  that  subscribed 
to  building  for  an  academy);  Chick  v.  Trevatt,  20  Me.  462,  464  (trus- 
tees of  society  for  building  a  parsonage.  Notes  of  trustees);  Mc- 
Grearcy  v.  Chandler,  58  Me.  537  (note  of  directors) ;  Band  v.  Infantry, 
134  Mich.  598,  601,  96  N.  W.  934;  Evans  v.  Lilly,  95  Miss.  58,  61,  48 
So.  612;  McWilliams  v.  Willis,  1  Wash.  199,  202  (Va.)  (lease  of  race 
track);  McKinnie  v.  Postles,  4  Perm.  (Del.)  16,  54  Atl.  798  (committee 
secm-ing  quarters  at  a  convention). 

Members  of  a  building  committee  of  an  unincorporated  Catholic 
church  were  held  personally  liable  for  materials  furnished  although  the 
plaintiff  charged  them  on  his  books  to  the  church  and  knew  that  it  was 
intended  to  raise  the  money  by  voluntary  contributions.  These  two 
facts  are  not  enough  to  imply  a  contract  to  be  paid  only  out  of  the  fund 
to  be  raised.  The  committee  are  Hable  either  as  members  of  the  associa- 
tion authorizing  the  work  or  as  agents  of  a  principal  who  is  non-exist- 
ent. The  fact  that  others  equally  Uable  have  not  been  joined  is  no  de- 
fense on  appeal.  It  should  have  been  pleaded  in  abatement.  Clark 
V.  O.'Rourke,  111  Mich.  108,  113,  69  N.  W.  147. 

Those  contracting  in  the  name  of  an  unincorporated  association  are 
themselves  liable  either  as  themselves  principals  or  as  purporting  to  act 
for  a  non-existent  principal.    Blakeley  v.  Bennecke,  59  Mo.  193. 

*  A  member  of  a  building  committee  of  a  church  may  be  personally 
liable  for  goods  forwarded  on  his  order  if  he  did  not  expressly  limit  his 
liabiUty.    Cruse  v.  Jones,  71  Tenn.  66. 

The  trustees  of  an  unincoiporated  church  signed  a  note  as  individuals 
for  its  debt.  Held :  They  are  personally  Uable  on  the  note.  To  escape  ha- 
biUty  on  the  ground  that  they  were  merely  agents  they  must  show  a  prin- 
cipal who  is  legally  Uable.    Phoenix  Ins.  Co.  v.  Burkett,  72  Mo.  App.  1,  3. 

^  A  majority  of  the  building  committee  of  a  church  signed  a  contract 
for  the  work  in  their  individual  names,  adding  "a  committee  for  build- 
ing," etc.  Held:  They  were  not  personally  Uable  on  the  contract.  The 
intent  to  contract  as  agents  was  plain  and  though  acting  only  by  a  ma- 
jority, it  was  ratified  later  by  the  votes  of  the  society.  Hewitt  v.  Wheeler, 
22  Conn.  557,  563. 

Plaintiff  made  a  written  offer  to  build  a  chvu-ch  for  a  price  named. 
It  was  accepted  by  the  defendants  individually.  He  sued  them  for  the 
price.    Evidence  showed  they  had  acted  only  as  a  committee  of  the 

299 


§  68]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

be  distinguished  on  a  more  careful  statement  of 
facts. 

Cases  have  arisen  where  the  plaintiff  sought  to  impose 
liability  because  the  defendant  was  a  member  of  a  com- 
mittee of  an  association  which  committee  had  con- 
tracted with  the  plaintiff.  The  same  principles  apply 
to  these  small  groups.  A  member  of  the  conunittee 
is  not  liable  in  the  absence  of  evidence  of  author- 
ization or  ratification.^  Ratification  may  be  found 
from    evidence  of    knowledge.'^     Ratification    cannot 

chiirch.  Held:  Not  individually  liable.  Johnson  v.  Welch,  42  W.  Va. 
18,  24  S.  E.  585. 

The  head  of  an  unincorporated  Catholic  sisterhood  was  sued  by  a 
priest  for  return  of  a  contribution  he  made  to  its  building  fund  on  con- 
dition that  if  they  ceased  to  use  if  for  the  purpose  of  a  convent  then  it 
was  to  be  returned  to  him.  Held:  She  was  not  individually  Uable  be- 
cause she  acted  as  agent  only  in  receiving  it.  Emonds  v.  Termehr,  60 
la.  92,  94,  14  N.  W.  197. 

A  member  of  the  building  committee  of  an  association  formed  to 
build  a  church  who  contracts  as  such  with  a  fellow  member  for  such  serv- 
ices, is  not  personally  hable,  for  the  plaintiff  knows  that  he  acted  only 
as  agent  for  that  society.    Abbott  v.  Cobb,  17  Vt.  593. 

8  Kutemen  v.  Lacy,  144  S.  W.  184  (Tex.  App.)  (building  committee 
of  a  lodge);  Todd  v.  Emly,  10  L.  J.  Exch.  161,  262,  7  M.  &  W.  427,  8 
M.  &  W.  505,  509  (managing  committee  of  a  club.  Action  for  wine  sold 
the  house  steward);  Cross  v.  WilMams,  7  H.  &  N.  675,  681,  31  L.  J. 
Exch.  145,  6  L.  T.  Rep.  N.  S.  675  (committee  in  charge  of  military  corps). 

Members  of  a  building  committee  of  a  church  were  held  not  person- 
ally hable  on  their  contracts  as  such.  "They  were  appointed  by  the 
body  of  the  subscribers  to  execute  a  mere  trust."  Cheney  v.  Clark,  3 
Vt.  431,  435. 

^  The  officers  of  a  dispensary  were  also  the  managing  committee. 
Held :  Liable  for  drugs  supphed  through  dispensary  on  orders  of  other 
officers  on  behalf  of  the  committee  to  their  knowledge.  This  was  the 
regular  cour.se  of  dealing.  Prima  facie  this  makes  them  hable  unless  the 
plaintiffs  agreed  to  look  only  to  the  fund  for  payment.  Luckombe  v. 
Ash  ton,  2  Fost.  &  Fin.  705. 

A  club  in  (hhi  authorized  its  committee  of  management  to  borrow 
monf'y.  Defcnrlant  and  plaintiff  were  members  of  committee.  De- 
fendant evidcndy  knew  it  was  being  done  though  he  did  not  attend  all 
the  meetings  at  whi(!h  it  was  disirussed,  including  the  meeting  at  which 
the  Hpcf:ific  loan  was  iirrangcd.  Plaintiff  had  to  pay  the  loan  and  now 
Hues  for  contributions.  Held:  Lialile.  Defendant  knew  and  approved 
what  W!iH  })eing  done.     Mount cashel  v.  Barl)er,  14  C.  B.  53,  68. 

Subscribers  to  (establish  a  hospital  elected  a  committee  to  manage  it. 

300 


Chap.  Vj  DISSOLUTION  [§  69 

be  found  of  a  contract  that  did  not  purport  to  bind 
the  defendant.^ 

§  69.  Dissolution 

A  vote  of  a  majority  of  an  association  to  dissolve  and 
distribute  the  assets  of  the  association  among  its  mem- 
bers is  void  unless  adopted  in  accordance  with  the  pro- 
visions of  the  by-laws  or  rules  of  the  association.^    The 

Defendant  was  a  member  of  the  committee  and  frequently  attended 
meetings  and  was  at  a  meeting  when  steward  presented  a  balance  sheet 
showing  plaintiff's  claim.  Held:  Defendant  personally  Uable.  Burle 
V.  Smith,  7  Bing.  705. 

A  "provisional  committee"  preparing  to  form  a  corporation  is  liable 
for  debts  incurred  by  its  secretary  only  if  authorized  on  the  principles 
of  principal  and  agent.  Mere  membership  is  not  conclusive,  but  is  com- 
petent evidence  of  authorization.  If  he  knew  of  the  weekly  meetings  of 
the  committee  and  saw  its  secretary  doing  work  which  involved  buying 
stationery,  that  was  evidence  of  authorization  of  its  purchase,  though 
he  never  specifically  authorized  pledging  his  individual  credit  or  thought 
of  liability  at  all.    Bailey  v.  Macauley,  19  L.  J.  (Q.  B.)  73,  81. 

A  member  of  a  provisional  committee  to  organize  a  railroad  was 
held  personally  Uable  for  a  bill  for  stationery.  He  knew  it  was  being 
used  and  that  the  committee  had  no  funds.  Barnett  v.  Lambert,  15 
M.  &  W.  489,  492. 

Charge  to  jury  that  managers  of  club  were  Mable  for  meats  ordered 
by  servants  of  the  club  even  if  they  had  no  personal  knowledge.  Steele 
V.  Gourley,  3  T.  L.  R.  118. 

But  merely  joining  other  members  of  a  committee  in  appointing 
a  sub-committee  according  to  the  rules  of  a  club  did  not  constitute  an 
authorization  of  expenditures  so  ^s  to  make  defendant  personally 
liable,  though  the  rules  said  that  all  authority  of  the  general  committee 
was  vested  in  the  sub-committee.  Draper  v.  Manvers,  9  T.  L.  R. 
73. 

*  Action  cannot  be  brought  against  seven  trustees  of  a  church  on  a 
contract  signed  by  three  of  them  as  individuals  even  on  an  allegation 
that  they  were  appointed  a  conxmittee  of  the  trustees  to  sign  the  con- 
tract without  reformation  of  it.  They  cannot  ratify  what  does  not 
purport  to  bind  them.  Ashley  v.  Henderson,  166  Ind.  147.  76  N.  E. 
985. 

1  St.  Mary's  Benev.  Ass'n  v.  Lynch,  64  N.  H.  213,  9  Atl.  98  (benefit 
society.  No  notice  of  meeting.  By-laws  forbade  dissolution  if  ten 
objected);  Kuhl  v.  Meyer,  42  Mo.  App.  474  (benefit  society.  But 
though  the  vote  at  the  meeting  improperly  called  did  not  dissolve  it, 
the  jury  might  find  it  dissolved  de  facto  by  failure  to  collect  dues  in 
accordance  with  another  provision  of  the  by-laws  for  lapse  of  member- 
ship by  non-payment  of  dues) ;  Torrey  v.  Baker,  1  Allen  120,  122  (fire 

301 


§  69]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

assent  of  every  member  is  required  to  effect  a  merger 
of  an  association  in  a  corporation.^  A  petition  for  disso- 
lution of  an  association  on  the  ground  that  dissensions 
made  it  impracticable  was  denied.^  Arbitrary  dismissal 
of  a  member  was  not  sufficient  ground  for  a  petition  by 
him  for  distribution  of  its  funds. ^  But  where  the  asso- 
ciation had  insurance  features,  the  rules  applicable  to 
petitions  for  dissolution  of  partnerships  were  applied.^ 

company.  Rules  required  two-thirds  vote) ;  Fischer  v.  Raab,  57  How. 
Pr.  87,  94  (N.  Y.)  (benefit  society.  Constitution  provided  that  there 
should  not  be  dissolution  if  five  voted  to  continue). 

With  the  consent  of  aU  members  a  mutual  burial  society  could  dis- 
solve and  distribute  assets  among  membere.  Stemmerman  v.  Lilien- 
thal,  54  S.  C.  440,  448,  32  S.  E.  535. 

In  the  case  of  a  farmers'  telephone  line  it  was  held  that  the  members 
could  divide  some  of  its  property  in  severalty  and  sell  the  remainder 
at  auction  and  then  reorganize  and  cut  off  one  of  their  former  mem- 
bers.   Primm  v.  Wliite,  162  ]Mo.  App.  594,  142  S.  W.  802. 

2  Mason  v.  Finch,  28  Mich.  282. 

3  Lafond  v.  Deems,  81  N.  Y.  507,  514  (see  52  How.  Pr.  41,  48) 
(benevolent  society);  Thomas  v.  Ellmaker,  1  Pars.  Eq.  Cas.  98,  111 
(Pa.)  (fii-e  company). 

4  Burke  v.  Roper,  79  Ala.  138,  144.  See  Burke  v.  Roper,  83  Ala. 
193,  3  So.  439  (rehgious  society). 

^  Plaintiffs,  members  of  labor  union,  filed  bill  for  dissolution  on 
ground  that  they  had  been  excluded  from  meetings  unless  they  would 
take  an  oath  not  provided  for  in  the  constitution  or  by-laws.  The 
association  provided  for  sick  benefits.  On  demurrer.  Held:  The  asso- 
ciation is  a  partnership  and  not  a  charity.  "It  partakes  of  the  nature 
of  a  partnership"  (p.  635).  Exclusion  of  partners  from  participation 
in  business  is  gi'ound  for  dissolution.  Demurrer  overruled  (p.  538). 
Gorman  v.  RusscU,  14  Cal.  531.  Having  reinstated  the  members  and 
abolished  the  oath  it  was  riglit  that  the  decree  of  dissolution  be  refused. 
Gorman  v.  Russell,  18  Cal.  688;  P'ischer  v.  Raab,  57  How.  Pr.  87,  94 
(N.  Y.). 

Members  of  a  benevolent  society  filed  a  bill  to  restrain  the  trustees 
of  the  society  from  dissolving  it  and  distributing  its  assets.  It  was 
stipulated  in  the  articles  that  it  should  never  be  dissolved  so  long  as 
seven  members  would  support  it.  Nature  of  society  not  clear  but 
seems  to  have  be(!n  some  sort  of  mutual  insurance  scheme.  Held: 
Nature  of  the  organization  such  that  its  agi'cement  (;annot  be  spe- 
cifically enforced.  The  only  relief  is  to  order  a  dissohition  and  distribu- 
tion of  jiHst^ts.  Court  describes  it  as  a  partnershij).  Beavunont  v.  Mere- 
dith, 3  Ves.  &  Beanies  ISO. 

An  injunc'tion  was  granted  on  a  bill  to  restrain  the  trustees  of  a 
Friendly  Society  from  apj)lying  any  of  its  funds  to  the  payment  of  the 

'M)2 


Chap.  V]  DISSOLUTION  [§69 

^'Equity  takes  cognizance  of  the  affairs  of  such  asso- 
ciations and  grants  rehef  by  treating  them  as  partner- 
ships or  by  looking  into  the  scheme  and  compelhng  con- 
formity to  it  or  reforming  it  and  enforcing  it;  or  if  the 
plan  is  deemed  impracticable,  decreeing  a  dissolution 
and  distributing  the  funds;  and  speaking  generally,  it 
redresses  as  far  as  it  can  the  grievances  of  the  mem- 
bers of  these  societies  who  complain  to  it  of  injustice 
affecting  their  pecuniary  interests  therein."  ^ 

Inactivity  continued  for  a  sufficient  length  of 
time    may    be    held    to    have    been    a    dissolution.'' 

annuities  payable  according  to  its  rules,  and  for  dissolution  on  the 
ground  that  its  rules  were  framed  on  erroneous  principles  and  the  an- 
nuities had  become  so  numerous  as  to  be  likely  to  exhaust  the  whole 
fund.     Reeve  v.  Parkins,  2  Jacob  &  Walker  390. 

A  local  lodge  of  a  fraternal  order  unincorporated  voted  to  dissolve 
connection  with  the  Supreme  Circle,  when  a  few  of  its  members,  as- 
suming to  act  for  it,  proceeded  to  incorporate  under  the  laws  of  New 
York.  Held:  The  unauthorized  incorporation  of  the  parent  circle 
materially  changed  the  preexisting  legal  relations  between  that  body 
and  its  subordinate  cncles.  "From  an  association  whose  obUgation 
to  and  control  over  its  members  was  entirely  voluntarily  the  Su- 
preme Circle  by  its  formal  incoi"poration  in  New  York  State  became 
thereafter  clothed  with  compulsory  powers  over  its  members."  The 
purpose  for  which  the  subordinate  circle  had  been  formed  has  failed, 
and  like  a  partnership  it  was  ipso  facto  dissolved  and  its  property  should 
be  distributed  pro  rata  to  the  members  by  receivers.  Pierson  v.  Gard- 
ner, 81  N.  J.  Eq.  505,  509,  86  Atl.  442. 

6  Van  Houten  v.  Pine,  36  N.  J.  Eq.  133,  137.     See  Burke  v.  Roper, . 
79  Ala.  138,  144. 

Partial  distribution  may  be  ordered  as  a  means  of  reorganization. 
Pu-ics  V.  First  Russian  Soc,  83  N.  J.  Eq.  29,  89  Atl.  1036. 

^  From  1836  to  1859  no  meetings  of  a  Masonic  lodge  were  held. 
Pursuant  to  vote  it  had  sold  all  property  and  placed  funds  in  hands  of 
academy  trustees  to  use  as  own  and  return  principal  on  demand.  No 
officers  elected  or  action  taken.  Later  there  was  a  revival  of  Masonry 
and  a  new  lodge  was  formed  which  claims  the  funds,  relying  on  rule 
that  officers  hold  office  tiU  successors  are  elected  and  on  the  intent  of 
individual  members  to  resume  some  day.  Held:  Such  associations 
may  become  dissolved  by  non-action  for  a  sufficient  length  of  time  and 
this  period  seems  sufficient.  The  rule  about  officers'  terms  was  not 
meant  to  apply  to  a  case  like  this.  Intent  of  individuals  immaterial. 
Legal  existence  of  old  chapter  gone  and  could  not  be  restored  by  Grand 
Chapter.     Strickland  v.  Prichard,  37  Vt.  324,  327. 

Neither  loss  of  corporate  property,  nor  failure  to  hold  regular  meet- 

303 


§  69]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

Death  ^  or  withdrawal  ^  of  a  member  of  course  does 
not  produce  a  dissolution. 

Upon  dissolution  of  an  association,  its  net  assets 
should  be  divided  equally  among  those  who  are  mem- 
bers at  that  time.^''  If,  however,  the  funds  have  been  im- 
pressed with  a  trust,  it  will  be  enforced  and  the  members 
are  not  entitled  to  divide  the  funds  among  themselves. ^^ 

ings  or  to  elect  corporate  officers,  nor  aU  combined  necessarily  amount 
to  a  forfeiture  unless  continued  for  a  long  term  of  years.  But  when  it 
is  conceded  that  the  objects  of  the  corporation  have  been  entirely 
abandoned  or  when  it  appears  that  the  power  to  resume  business  does 
not  exist,  then  a  legal  dissolution  may  be  declared.  This  rule  of  cor- 
porations apphes  to  unincorporated  associations.  Kuehl  v.  Meyer,  50 
Mo.  App.  648,  656.    See  Kueld  v.  Meyer,  42  Mo.  App.  474. 

Members  and  officers  of  a  labor  xmion  joined  another  similar  one 
which  had  a  clause  in  its  constitution  forbidding  members  to  belong 
to  any  other  such  organization.  The  first  union  did  not  have  such 
provision  in  its  constitution.  Held:  That  the  first  union  was  not  dis- 
solved by  the  act  of  its  officers  and  that  though  the  rule  of  the  second 
union  might  justify  expulsion  from  that,  it  did  not  affect  membership 
in  fact.     Farrell  v.  Dalzell,  5  N.  Y.  S.  729. 

A  testatrix  left  property  in  remainder  to  a  church.  When  the  life 
estate  ended  it  appeared  that  the  chui'ch  had  had  no  pastor  or  meet- 
ings for  fifteen  years.  Eleven  persons  who  had  been  members  then 
met  and  elected  trustees  but  did  nothing  more.  Held:  An  associa- 
tion may  be  dissolved  by  abandonment  as  well  as  by  voluntary  action. 
The  action  of  these  individuals  could  not  recreate  it.  MiUer  v.  Riddle, 
227  111.  53,  58,  81  N.  E.  48. 

A  member  of  an  association  cannot  compel  in  equity  a  return  of  his 
contribution  to  its  funds  unless  he  estabhshes  that  the  purposes  of  the 
association  have  been  abandoned,  its  operations  ceased  and  its  ob- 
jects entirely  failed.  Perversion  of  funds  by  trustees  wiU  be  prevented 
and  the  trustees  held  accountable,  but  perversion  alone  does  not  author- 
ize distribution  to  the  members.  Roper  v.  Burke,  83  Ala.  193,  195,  3 
So.  439.    See  ditto,  79  Ala.  138. 

8  Ostrom  V.  Greene,  161  N.  Y.  353,  360,  55  N.  E.  919  (dictum). 

9  Moore  v.  Telephone  Co.,  171  Mich.  388,  399,  137  N.  W.  241  (sale 
of  all  interest  in  a  farmers'  telephone  hne). 

10  Parks  V.  Trust  Co.,  122  N.  Y.  S.  521,  137  App.  Div.  719  (associa- 
tion of  corporations);  U.  O.  A.  D.  v.  Mullen,  24  O.  C.  C.  239  (lodge); 
Brown  ».  Dale,  9  Ch.  D.  78  (guild);  Re  Printers',  etc.  Soc,  (1899) 
2  Ch.  1H4  (divided  pro  rain  their  contributions). 

"  Smith  V.  Kerr,  (1902)  1  Ch.  774. 

The  CoiuK'(;tiout  Lodge  of  United  Workmen  were  set  off  from  juris- 
diction of  th«!  Massachusetts  Grand  Lodge  under  a  Connecticut  Grand 
Lodge.  Latter  lirings  bill  in  (>quity  for  tiiem  for  proper  division  of 
funds.    Hiild :  The  various  lodges  and  grand  lodges  are  not  independent, 

304 


Chap.  V]  DISSOLUTION  [§  69 

When  a  fund  is  held  in  trust  for  contributors,  it  will 
be  distributed  to  them  in  proportion  of  their  contribu- 

but  are  under  a  common  law  which  comes  from  the  members.  "The 
complaint  alleges  that  the  order  is  a  fraternal  insurance  organization. 
The  rights  of  its  members  are,  accordingly,  something  more  than  that 
of  social  association.  Rights  of  property  are  attached  to  membership." 
Equity  will  enforce  the  trust  attached  to  these  funds.  A.  O.  U.  W.  v. 
A.  O.  U.  W.,  81  Conn.  189,  205,  70  Atl.  617. 

Members  of  a  church  of  a  denomination  whose  rules  provide  that  on 
dissolution  property  vests  in  a  board  of  the  general  denomination,  can- 
not claim  thiat  on  abandonment  property  should  be  sold  and  proceeds 
divided  among  members.  Heisler  v.  Methodist  Church,  147  N.  W. 
750    (la.). 

By-laws  of  a  Masonic  lodge  appropriated  its  property  to  promoting 
"the  good  of  the  craft  or  relief  of  indigent  and  distressed  worthy 
Masons,  their  widows  and  orphans."  Held:  This  is  trust  for  charity, 
however  derived.  Such  a  body  may  dissolve  but  trust  fund  cannot  be 
distributed  to  members.  Trust  will  be  executed.  Hence  this  suit  by  a 
member  for  his  share  fails.  Duke  v.  FuUer,  9  N.  H.  536,  540,  32  Am. 
Dec.  392. 

A  local  lodge  of  K.  of  P.  dissolved  and  divided  its  assets  among  the 
members,  including  trust  funds  that  had  accumulated.  Law  of  order 
provided  that  on  dissolution  all  assets  vest  in  Grand  Lodge,  a  corpora- 
tion which  here  sues  the  individuals  who  divided  up  the  funds.  Held: 
Those  who  took  an  active  part  in  the  division  are  jointly  and  severally 
hable  for  the  whole  fund.  Trust  funds  cannot  be  diverted  from  the  trust 
set  forth  in  the  constitutions  of  supreme  and  subordinate  lodges  and 
those  assisting  in  breach  of  trust  are  hable  for  the  consequences.  Grand 
Lodge,  K.  P.  V.  Germania  Lodge  No.  50,  56  N.  J.  Eq.  63,  73,  38  Atl. 
341. 

Bill  by  members  of  charitable  association  against  its  treasurer  for 
an  account.  The  association  voted  in  1825  to  transfer  its  funds  to  an- 
other society  having  the  same  object.  Then  held  no  meetings  till  1830, 
when  meeting  voted  to  transfer  some  of  its  funds  to  a  seminary  not 
having  the  same  object.  Apparently  first  vote  was  not  carried  out. 
Held:  Associations  for  charity  are  trustees  of  funds  contributed.  Offi- 
cers will  as  trustees  be  bound  to  account.  Contributions  must  be  deemed 
made  according  to  the  articles  of  agreement  whether  called  constitu- 
tion or  by-laws.  If  so  provided,  majority  may  control  minority  within 
the  purposes  of  the  association.  Fund  cannot  be  diverted  to  different 
object  without  the  consent  of  the  contributors,  and  if  the  object  entii-ely 
fails  then  contributors  would  be  entitled  to  a  refund.  The  first  vote  was 
to  a  society  having  the  same  objects  and  so  was  vahd.  The  second  was 
not.    Bill  sustained.    Penfield  v.  Skinner,  11  Vt.  296,  298. 

A  meeting  of  drafted  men  was  held  and  money  contributed  to  reheve 
aU  from  draft  by  hii'ing  substitutes.  No  constitution  or  by-laws.  Treas- 
urer elected.  At  a  later  meeting  it  was  voted  that  any  surplus  be  given 
to  charity.  After  war  surplus  given  to  defendant  to  estabhsh  a  dispen- 
sary. Nine  plaintiffs  bring  bill  in  equity  to  recover  contributions. 
Held:  Five  were  present  at  meeting  that  voted  to  give  to  charity 

305 


§  69]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

tions.^2  Individual  members  of  an  association  do  not 
upon  dissolution  acquire  the  rights  of  the  asso- 
ciation in  a  contract  made  with  them  as  an 
association.^^ 

As  we  have  seen/^  title  to  personal  property  is  in  the 
association.  So  when  a  majority  of  the  members  vote 
to  incorporate  or  combine  with  another  organization, 

and  they  cannot  recover.  The  other  four  might  sue  treasurer  who 
paid  money  to  defendant,  but  not  defendant  because  no  privity  of 
contract.  Contributors  to  a  fund  placed  in  hands  of  trustees  for  a 
specific  purpose  have  right  in  equity  to  surplus  not  needed  for  that 
object  in  proportion  to  contributions.  Abels  v.  McKeen,  18  N.  J. 
Eq.  462,  464. 

In  States  where  the  doctrine  of  cy  pres  does  not  exist,  when  an  unin- 
corporated religious  society  ceases  to  exist,  lands  held  in  trust  for  it 
revert  to  the  donor.    Pringle  v.  Dorsey,  3  S.  C.  502. 

In  the  case  of  a  burial  gi'ound,  the  heirs  of  those  buried  there  were 
also  said  to  have  an  interest  in  the  trust  estate.  Appeal  of  Gumbert, 
110  Pa.  St.  496,  1  Atl.  437. 

12  Burke  v.  Roper,  79  Ala.  138,  144. 

A  fund  was  raised  by  subscription  for  the  assistance  of  the  sick  and 
wounded  in  the  Balkan  war.  Subscriptions  were  received  at  different 
times  and  were  apphed  by  the  trustees.  After  the  war  there  was  an  un- 
expended balance.  Held:  The  rule  of  Clayton's  case,  1  Merivale  572, 
608,  is  inapplicable,  and  the  balance  belongs  to  all  the  subscribers  in 
proportion  to  their  subscriptions  irrespective  of  date.  British  Red 
Cross  Soc.  V.  Johnson,  (1914)  2  Ch.  419. 

1*  Expelled  members  of  a  church  organized  separately  and  by  agree- 
ment between  the  two  churches  the  property  was  to  be  used  by  both. 
Later  the  new  church  disbanded  and  its  individuals  attempted  to  reor- 
ganize and  enforce  rights  under  the  agi'eement.  Held:  The  agreement 
was  with  the  church  as  a  society,  the  rights  conferred  cannot  exist  after 
the  society  has  been  dissolved.  The  members  individually  did  not  ac- 
quire the  rights  of  the  church  when  it  disbanded.  Berryman  v.  Reese, 
50  Ky.  287,  290. 

A  coll(!ge  had  contracted  that  its  trustees  should  be  elected  by  the 
synod  of  Kentucky,  which  was  defined  to  be  that  body  which  is  con- 
nected with  the  General  Assembly  of  the  Presbyterian  church  of  the 
U.  S.  A.  During  the  war  the  synod  spht  and  one  party  adhered  to  the 
(Umcnd  Assembly  and  maintained  its  organization.  The  other  joined 
anotlicr  national  organization.  Both  synods  elecitcd  trustees  of  the 
college!.  One  H(.'t  of  trustees  brought  bill  to  enforce  its  rights  to  the  office. 
H<'1(1:  The  contract  clearly  defines  the  synod  which  has  the  power 
to  el(!ct  and  th<TC  has  be<;n  no  breach  in  the  continuity  of  it.  No 
fiuestion  of  majority  rule  can  be  considered.  Kinkead  v.  McKee,  72 
Ky.  535. 

'«  Sec  §  60,  note  45. 

80G 


Chap.  V]  PARTIES   IN   LITIGATION  [§  70 

those  who  insist  on  keeping  up  the  old  organization, 
however  few,  are  entitled  to  its  property. 


§  70.  Parties  in  Litigation 

Just  as  a  partnership  at  common  law  cannot  sue  or 
be  sued  in  its  firm  name,  so  an  association  not  organ- 
ized for  profit  cannot  appear  as  a  party  in  court  as  an 
association.^  Its  members  should  be  joined  as  individ- 
uals.^   If,  by  mistake,  the  association  is  named  as  a 

1  Thurmond  v.  Cedar  Springs  Baptist  Church,  110  Ga.  816,  36  S.  E. 
221;  Cain  v.  Armenia  Lodge,  12  Ga.  App.  251,  77  S.  E.  184;  Mackenzie 
V.  Edinburg  Board  of  School  Trustees,  72  Ind.  189;  Furniture  Co.  v. 
Union,  165  Ind.  421,  423,  75  N.  E.  877  (trade  union);  Nightingale  v. 
Barney,  4  la.  106  (Masonic  lodge);  Hanley  v.  Telephone  Co.,  150  la. 
198,  129  N.  W.  807,  808;  Workingmen's  Bank  v.  Converse,  29  La.  Ann. 
369,  370;  Littleton  v.  I.  O.  U.  A.  M.,  98  Md.  453,  56  Atl.  798;  Pickett 
V.  Walsh,  192  Mass.  572,  590,  78  N.  E.  753  (trade  union);  Detroit 
Schuetzen  Band  v.  Detroit  Agitations  Verein,  44  Mich.  313,  6  N.  W. 
675;  Typothetae  v.  Union,  94  Minn.  351,  102  N.  W.  725,  727;  Cleland  v. 
Anderson,  66  Neb.  252,  272,  92  N.  W.  306,  96  N.  W.  212,  98  N.  W.  1075; 
Bossert  v.  Dhuy,  151  N.  Y.  S.  877  (App.  Div.)  (trade  union) ;  Church 
V.  CUfton,  34  Tex.  Civ.  App.  248,  78  S.  W.  732;  Home  Benefit  Ass'n  v. 
Weston,  146  S.  W.  1022  (Tex.  App.);  SmaU  v.  Federation,  5  Ont.  L.  R. 
456,  458  (trade  union);  Kingston  v.  Salvation  Army,  6  Ont.  L.  R.  406, 
411,  aff'd  7  Ont.  L.  R.  681. 

Where  a  trade  union  was  used  as  such  and  enjoined,  it  could  not  for 
the  first  time  raise  the  question  of  proper  parties  on  the  contempt  pro- 
ceedmg.    Barnes  Co.  v.  Chicago  Union,  232  111.  402,  83  N.  E.  932. 

An  unincorporated  church  cannot  sue  in  its  association  name,  but 
may  elect  trustees  to  do  so.  Arts  v.  Guthrie,  75  la.  674,  677,  37  N.  W. 
395. 

An  action  cannot  be  instituted  in  the  name  of  an  unincorporated 
church  "by"  certain  designated  officers  unless  it  has  complied  with  the 
statute  requiring  registration  of  the  name,  style  and  object  of  the  asso- 
ciation. Mutual  Life  Co.  v.  Inman  Parks  Church,  111  Ga.  677,  679,  36 
S.  E.  880. 

Churches  in  West  Virginia  cannot  be  incorporated  and  so  cannot 
sue  or  be  sued  as  such.  Lunsford,  etc.  Co.  v.  Wren,  64  W.  Va.  458,  465, 
63  S.  E.  308. 

2  Suit  against  labor  union  to  restrain  boycott.  Seattle  Co.  v.  Han- 
sen, 144  Fed.  1011  (C.  C.  —  Cal.);  SoUer  v.  Mouton,  3  La.  Ann.  541; 
LiUy  V.  Tobbein,  13  S.  W.  1060  (Mo.)  (church);  Schmidt  v.  Gunther, 
5  Daly  452  (N.  Y.). 

At  common  law,  apart  from  statute,  aU  members  of  an  imincor- 
porated  fraternal  order  must  sue  on  a  bond  given  to  it  in  its  associa- 

307 


§  70]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

party,  in  some  States  an  amendment  to  the  names  of 
indmdual  members  is  held  improper.^  TMien  the  mem- 
bers were  named  as  individuals  it  has  been  held  not  im- 
proper practice  to  add  the  name  of  the  association  "to 
distinguish  them  in  their  associated  capacity,"  ^  but 
the  association  as  such  should  not  execute  an  appeal 
bond  for  them.^ 

If  a  plaintiff  brings  an  action  against  only  part  of 
the  members,  they  may  plead  that  fact  in  abatement,^ 

tion  name.  Misnomer  in  the  bond  may  be  cured  by  evidence  that  the 
association  commonly  was  known  by  that  name.  O'Connell  v.  Lamb, 
63  111.  App.  652,  656. 

A  note  and  mortgage  was  made  to  the  Southwestern  Baptist  Asso- 
ciation. Held:  An  action  on  it  by  the  members  of  the  executive  board 
of  the  association  should  be  dismissed.  If  not  a  corporation,  the  mem- 
bers of  the  association  should  sue  as  partners.  Jones  v.  Watson,  63 
Ga.  679. 

3  Maisch  v.  O.  A.,  223  Pa.  St.  199,  200,  72  Atl.  52S  (benefit  society); 
Nunn  V.  Louisville,  31  Ky.  Law  Rep.  1293,  105  S.  W.  119,  121  (statute 
of  hmitations  had  run). 

But  when  an  association  had  been  incorporated  and  by  mistake 
suit  was  brought  by  the  corporation,  an  amendment  was  allowed  after 
the  statute  of  limitations  had  nm  bringing  in  members  of  the  associa- 
tion as  plaintiffs.    LiUy  v.  Tobbein,  13  S.  W.  1060,  1062  (Mo.). 

Where  union  and  some  members  were  simimoned  as  defendants, 
they  were  ordered  to  amend  and  aver  that  the  indix-iduals  were  mem- 
bers of  the  association.  American,  etc.  Co.  v.  Wire  Drawers,  etc.  Union, 
90  Fed.  598,  600. 

iNIasonic  lodge  which  had  been  incorporated  sued  to  escape  taxa- 
tion as  a  charitable  corporation  but  the  plaintiff  as  described  was  an 
unincorporated  association.  Held:  Against  defendant's  objection 
cannot  amend  so  as  to  make  the  corporation  plaintiff,  for  that  would 
be  to  insert  a  new  party.  Marsh  River  Lodge,  F.  &  A.  M.  v.  Brooks, 
61  Me.  585,  587. 

*  Hanlev  v.  Telephone  Co.,  150  la.  198,  129  N.  W.  807,  808  (farmers' 
telephone  line);  S.  v.  Live  Stock  Exchange,  211  Mo.  181,  109  S.  W. 
675. 

s  Under\^Titers  v.  Mercantile  Co.,  131  111.  App.  617,  620. 

«  Pickett  V.  Walsh,  192  Mass.  572,  78  N.  E.  753  (trade  union); 
Robinson  v.  Robinson,  10  Me.  240,  243;  Hogdon  v.  Gardner,  2  Ohio 
Cir.  Court  340,  343;  see  Richardson  v.  Hixstings,  7  Beav.  301,  323, 
11  Beav.  17. 

Members  of  live  stock  exchange  expelled  must  join  all  the  directors. 
Greer  v.  Stolior,  77  Fed.  (C.  C.  —  Mo.). 

In  an  action  on  a  note  given  by  an  association  to  one  of  its  mem- 
bers and  endorsed  by  certain  others  brought  against  the  endorsers, 

308 


Chap.  V]  PARTIES  IN  LITIGATION  [§  70 

but  in  that  case  the  defendant  must  aver  who  are  the 
proper  parties.^ 

In  suits  in  equity,  where  the  members  are  numerous, 
however,  the  usual  equity  rule  is  applied  and  a  few  are 
allowed  to  sue  on  behalf  of  themselves  and  all  others 
who  may  join.^  Those  who  sue  on  an  obligation  due 
the  association  must  show  their  authority  to  act  for  the 
rest.®   The  petition  should  set  forth  facts  to  justify  such 

Held:  AU  members  should  be  brought  in  as  partners  and  all  rights 
settled  in  one  proceeding.  Conway  v.  Zender,  154  Wis.  479,  143  N. 
W.  162. 

^  Humbert  v.  Abeel,  7  N.  Y.  Civ.  Proc.  417. 

8  Beatty  v.  Kurtz,  2  Pet.  566,  584  (church);  Callsen  v.  Hope,  75 
Fed.  758,  760  (D.  C.  —  Alaska)  (bill  by  members  of  a  church  to  en- 
join trespass  on  its  real  estate);  Whitney  v.  Mayo,  15  111.  251,  255 
(church) ;  Pipe  v.  Bateman,  1  la.  369  (emigrant  aid  society) ;  McConneU 
V.  Gardner,  Morr.  272  (la.)  (chm-ch);  Payne  v.  Lodge,  115  S.  W.  764 
(Ky.)  (lodge);  Birmingham  v.  Gallagher,  112  Mass.  190,  192  (benefit 
society);  Snow  v.  Wlieeler,  113  Mass.  179,  185  (trade  union);  Lilly  v. 
Tobbein,  13  S.  W.  1060,  1062  (Mo.)  (reUgious  association);  Bloets  v. 
Simon,  12  N.  Y.  Civ.  Proc.  114,  19  Abb.  N.  C.  88  (N.  Y.)  (trade  union 
suit  under  code);  Marshall  v.  Loveless,  1  N.  C.  325  (one  member  sued); 
Liggett  V.  Ladd,  17  Ore.  89,  94,  21  Pac.  133  (church);  Liederkranz 
Singing  Society  v.  Germania  Turn-Verein,  163  Pa.  St.  265,  268,  29 
Atl.  918  (music  club);  Nance  v.  Busby,  91  Tenn.  303,  315,  18  S.  W. 
874  (church);  Perkins  v.  Siegfried,  97  Va.  444,  450,  34  S.  E.  64;  Smith 
V.  Nelson,  18  Vt.  511,  568  (one  member  sued);  Lloyd  v.  Loaring,  6  Ves. 
Jr.  773,  776  (Masonic  lodge). 

Defendant  signed  a  subscription  paper  towards  improvements  on  a 
Catholic  church.  Paper  named  no  payee.  Title  to  the  property  was 
in  the  bishop.  He  sued  as  bishop  for  himself  and  the  St.  T.  Church, 
a  rehgious  association  unincorporated,  the  members  of  which  are  too 
numerous  to  be  brought  before  the  court.  Held:  Proper  plaintiff. 
Egan  V.  Bonacum,  38  Nebr.  577,  579,  57  N.  W.  288. 

9  Determann  v.  Luehrsmann,  74  la.  275,  278,  37  N.  W.  330  (church); 
Smith  V.  Pinney,  86  Mich.  484,  493,  49  N.  W.  305  (church). 

It  has  also  been  said  that  such  practice  will  be  permitted  "if  with 
the  consent  or  by  the  direction  of  the  rest  or  a  majority  of  them." 
Payne  v.  Lodge,  115  S.  W.  764  (Ky.).  See  Marshall  v.  Loveless,  1  N. 
C.  325,  Cameron  and  Nor.  217,  284. 

Bill  by  member  of  reUgious  association  dismissed  because  it  did  not 
appear  to  be  brought  at  the  instance  of  a  majority  of  the  church  or  a 
majority  of  the  male  members,  but  at  the  election  of  one  member  only, 
which  is  insufficient  in  the  case  of  a  private  charity.  Parker  v.  May, 
5  Cush.  336,  351. 

The  deacons  of  a  Baptist  church  as  such  have  no  power  to  sue  with 

309 


§  70]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

a  course.^"  The  practice  in  some  States  has  been  ex- 
tended to  actions  at  law.^^  So  where  the  defendants  are 
alleged  to  be  numerous,  a  few  may  be  joined/^  and  an 
injunction  against  them  as  individuals  will  restrain 
illegal  action  by  them  in  their  associate  capacity  ^^  and 
will  bind  all  who  have  notice  whether  parties  or  not.^^ 
It  is  always  a  question  for  the  court  whether  those 
brought  in  are  fairly  representative.^^  In  a  bill  in  equity 
by  a  member  of  a  benefit  society  to  collect  a  benefit 
payment  out  of  the  funds  of  the  order  it  was  held  suf- 

respect  to  church  property,  control  of  which  rests  in  the  congregation. 
Drew  V.  Hogan,  26  App.  D.  C.  55,  59. 

1"  McConnell  v.  Gardner,  Morr.  272  (la.)  (chiu'ch).  In  representa- 
tive actions  the  nature  of  the  conunon  interest  must  appear.  Habicht 
V.  Pemberton,  4  Sand.  657  (N.  Y.). 

"  Klein  v.  Rand,  35  Pa.  Sup.  Ct.  263,  267;  Stemmerman  v.  Lihen- 
thal,  54  S.  C.  440,  448,  32  S.  E.  535  (under  code).  But  see  Habicht  v. 
Pemberton,  4  Sand.  657,  658  (N.  Y.).  In  the  absence  of  statute  it  has 
been  refused.  Westbrook  v.  Griffin,  132  la.  185,  187,  109  N.  W.  608 
(farmers'  telephone  line). 

12  Smith  V.  Swormstedt,  16  How.  288,  302  (rehgious  society) ;  Even- 
son  V.  Spaulding,  150  Fed.  517,  523  (C.  C.  A.)  (unfair  competition); 
Gorman  v.  Russell,  14  Cal.  531,  539  (mutual  benefit  association); 
Fitzpatrick  v.  Rutter,  160  111.  282,  286,  43  N.  E.  392  (trade  union); 
Union  v.  Barnes,  134  111.  App.  11,  18  (contempt  against  union);  Keller 
V.  Tracy,  11  la.  530  (church);  Pickett  v.  Walsh,  192  Mass.  572,  590, 
78  N.  E.  753  (trade  union);  Van  Houten  v.  Pine,  36  N.  J.  Eq.  133,  138 
(Masonic  benefit  society,  "  It  is  enough  if  so  many  be  made  parties  as 
to  insure  a  fair  and  honest  trial,"  president  and  treasurer  enough); 
Kimball  v.  Lower  Columbia  Ass'n,  67  Ore.  249,  135  Pac.  877  (church); 
Branson  v.  I.  W.  W.,  30  Nev.  270,  95  Pac.  354  (trade  union.  At  law, 
by  statute);  Roofing  Co.  v.  Int.  Ass'n,  5  Ont.  L.  T.  424,  9  Ont.  L.  R. 
171,  178  (tort  for  conspiracy  against  trade  union). 

"  American  Steel,  etc.  Co.  v.  Wu-e  Drawers,  etc.  Union,  90  Fed. 
598,  603. 

"  American  Steel,  etc.  Co.  v.  Wire  Di-awers,  etc.  Union,  90  Fed.  598, 604, 

'^  "In  the  case  of  an  organized  strike  of  laborers  it  is  fair  enough  if 
the  leaders  of  the  strike  be  brought  in  to  roj^rcscnt  the  organization  no 
matter  what  their  official  relation  to  the  society  may  be."  Duly  elected 
officfirs  for  tliaf.  ])ur])ose  will  suffice  as  plaintiffs  but  cannot  be  made 
reqiilKitc  as  (icfendunts.  American  Steel,  etc.  Co.  v.  Wire  Drawers,  etc. 
Union,  90  VvA.  5i)S,  607. 

Service  on  members  who  did  not  authorize  the  torts  will  not  justify 
nil  injunction  against  otiuTs  not  served.  Hill  v.  Eagle  Co.,  219  Fed. 
717  (C.  C.  A.  —  W.  Va.). 

310 


Chap.  V]  PARTIES   IN   LITIGATION  [§  70 

ficient  to  join  as  defendant  the  treasurer,  who  was  in  pos- 
session of  the  funds  as  trustee  and  its  chief  executive 
officer.^® 

A  treasurer  of  an  association  as  such  cannot  sue  to 
recover  property  of  which  the  by-laws  give  him  cus- 
tody.^'^  But  officers  can  sue  on  obligations  running  to 
them  as  officers. ^^  It  is  no  objection  that  both  plain- 
tiff and  defendant  are  members  of  the  same  associa- 
tion.19 

By  statute  in  several  States  unincorporated  asso- 
ciations like  corporations  may  sue  and  be  sued  in  their 
association  names. ^°    In  New  York  an  association  of 

1*  The  proceeding  was  said  to  be  in  the  nature  of  the  estabhshment 
of  an  equitable  hen.  Colley  v.  Wilson,  86  Mo.  App.  396,  402;  Harris 
V.  Wilson,  86  Mo.  App.  406,  420. 

President  and  treasurer  sufficient.  Payment  ordered  out  of  surplus. 
Van  Houten  v.  Pine,  36  N.  J.  Eq.  133,  137. 

"  DeveUe  v.  Plummer,  5  Col.  App.  113,  37  Pac.  947. 

18  Hecker  v.  Cook,  20  Col.  App.  282,  78  Pac.  311  (bond  running  to 
treasurer);  Whitcomb  v.  Smart,  38  Me.  264,  266  (note  to  "E.  W.,  P. 
S.  of  A."  of  a  lodge.  Suit  properly  brought  in  his  name  though  he  had 
retired  from  office);  Bridenbeker  v.  Hoard,  32  How.  Pr.  289  (N.  Y.) 
(authority  by  statute  to  sue) ;  Rhodes  v.  Maret,  45  Tex.  Civ.  App.  593, 
101  S.  W.  278. 

Upon  a  written  promise  to  pay  money  "to  the  treasurer  of"  an  un- 
incorporated society,  the  members  of  the  society,  not  the  treasurer,  are 
the  proper  parties  plaintiff.    Ewing  v.  Medlock,  5  Porter  82  (Ala.). 

An  unincorporated  company  borrowed  money  and  took  a  note  to 
the  order  of  "the  Captain  of  Company  A."  At  the  time  of  suit  there 
was  no  captain  and  by  vote  of  the  company  the  note  was  transferred 
to  plaintiff  to  hold  and  collect  for  the  company.  Held :  This  gave  him 
sufficient  interest  to  maintain  the  bill.  (Query,  if  bill  in  equity.) 
Waugh  V.  Andel,  21  111.  App.  389. 

The  treasurer  of  an  unincorporated  church  may  sue  in  his  own  name 
on  subscriptions  made  to  him  as  treasurer  for  building  a  church  if  in 
pursuance  of  the  subscription  he  had  commenced  the  construction. 
The  words  "as  treasurer,"  etc.,  the  association  having  no  corporate  ex- 
istence, may  be  regarded  as  surplusage.    McDonald  v.  Gray,  11  la.  508. 

Statute  required  a  society  to  file  certificate  with  clerk  of  election  of 
trustees.  Held :  This  not  condition  precedent  to  action  by  trustees  on 
claim  of  the  society.  Hence,  society  cannot  sue  again  claiming  former 
suit  invahd.    Roberts  v.  Hill,  137  Ind.  215,  36  N.  E.  843. 

"  Whitcomb  v.  Smart,  38  Me.  264,  266. 

20  Ex  parte  HiU,  165  Ala.  365,  369,  51  So.  786. 

The  association  is  the  only  proper  defendant.    Judgment  binds  prop- 

311 


§  70]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

over  seven  members  may  sue  and  be  sued  in  the  name  of 
its  president,-^  but  action  may  still  be  brought  against  all 
the  members  as  at  conmion  law,-  or  by  a  few  on  behalf 
of  all. 2^    Apart  from  these  statutes  an  association  in 

erty  of  the  association  only.  Davidson  v.  Knox,  67  Cal.  143,  146,  7  Pac. 
413;  Mokelumne  Co.  v.  Knox,  7  Pac.  415  (Cal.). 

But  see  Gieske  v.  Anderson,  77  Cal.  247,  248,  19  Pac.  421,  where  a 
treasurer  of  an  association  was  allowed  to  sue  a  former  treasurer  for 
funds  he  had  retained. 

If  statute  does  not  take  away  right  to  sue  individuals,  it  is  not  un- 
constitutional.   Heater  Co.  v.  Union,  129  :Mich.  354,  362,  88  N.  W.  889. 

Powhatan  Steamboat  Co.  v.  Potomac  Steamboat  Co.,  36  Md.  238, 
244;  Littleton  v.  I.  O.  U.  A.  M.,  98  IMd.  453,  56  Atl.  798;  Cornfield  v. 
Order  Brith  Abraham,  64  Minn.  261,  263,  66  N.  W.  970;  Saunders  v. 
Am.  Express  Co.,  71  N.  J.  L.  270,  57  Atl.  899,  58  Atl.  1101;  King  ;;. 
Nichols,  2  Ohio  Dec.  (reprint)  564. 

By  statute  in  jNIassachusetts  an  imincorporated  church  is  entitled 
to  receive  and  to  sue  for  gifts  and  donations,  so  that  an  information  in 
the  name  of  the  Attorney  General  is  not  an  appropriate  remedy  for 
breach  of  trust  with  reference  to  its  trust  funds.  Attornev  General  v. 
Clark,  167  Mass.  201,  204,  45  N.  E.  183. 

21  Ruhl  V.  Ware,  4  N.  Y.  S.  624;  Winter  v.  Hamm,  5  N.  Y.  Civ.  Proc. 
194,  196;  Cohn  v.  Borst,  36  Hun  562;  IMcGljom  v.  Post,  21  Abb.  N.  C. 
97. 

By  statute  in  New  York  creditors  of  a  joint  stock  association  must 
first  sue  the  president  and  collect  out  of  the  assets  of  the  association. 
If  they  cannot  collect,  then  thej'  may  sue  indi\'idual  members  of  asso- 
ciation. The  recovery  in  the  first  suit  is  not  made  conclusive  in  the 
second.  The  association  here  was  hable  as  undisclosed  principal  for 
the  acts  of  its  superintendent.  But  since  undisclosed,  the  liabihty  did 
not  continue  after  it  had  transferred  its  assets  to  a  corporation.  Like 
dormant  partners,  not  bound  to  give  notice  of  termination  of  authority. 
If  had  been  known  as  principal,  notice  of  termination  of  authority 
would  have  been  necessary.  Allen  v.  Clark,  65  Barb.  (X.  Y.)  563,  574, 
575. 

Statute  authorized  action  by  president  of  voluntary  association  re- 
gardless of  whether  members  of  association  reside  or  transact  their  busi- 
ness in  the  State.  Clancy  v.  Terhune,  1  N.  Y.  Citv  Ct.  239.  See  Coombe 
V.  Harford,  99  Me.  426,  433,  59  Atl.  529. 

"As  between  an  individual  member  on  the  one  hand  and  the  asso- 
ciation in  its  official  capacity  on  the  other,  the  association  is  to  be  re- 
garded as  a  guasi  corporation  capable  of  being  sued  by  such  member  for 
any  breach  of  its  official  obligations.  (Under  code.)  Ex])ulsion.  Win- 
ter V.  Hamm,  5  N.  Y.  Civ.  Proc.  194,  196. 

«  Schwartz  v.  Welcher,  20  N.  Y.  S.  861;  Peckham  v.  Wentworth,  116 
N.Y.  H.781. 

»  Bloetc  t;.  Simon,  12  N.  Y.  Civ.  Proc.  114,  19  Abb.  N.  C  88;  Rourkc 
V.  Drug  Co.,  77  N.  Y.  S.  373,  75  App.  Div.  145. 

Action  for  conspiracy  and  combination  to  prevent  plaintiff  from  car- 

312 


Chap.  V]  PARTIES   IN   LITIGATION  [§  70 

New  York  cannot  sue.^^  In  Massachusetts  a  trade 
union  may  sue  by  an  officer  to  enjoin  unlawful  use  of  its 
trade  mark,  the  union  label. ^^ 

A  statute  providing  for  service  of  process  on  an  agent 
of  an  unincorporated  association  does  not  deprive 
members  of  their  rights  without  due  process  of  law.^® 
The  usual  rules  of  evidence  are  applied." 
Thus  the  books  of  the  association  are  admissible 
evidence  to  prove  its  action.-^  When  the  defendant 
failed  to  produce  under  subpoena  its  constitution  and 

rying  on  his  trade.  One  of  defendants  was  named  as  president  of  asso- 
ciation as  well  as  an  individual.  On  demurrer  it  was  contended  that 
under  the  statute  the  plaintiff  could  not  sue  members  of  an  unincor- 
porated association  of  more  than  seven  members  when  action  is  also 
brought  against  its  president  or  treasurer  till  after  final  judgment  in  that 
latter  action.  Held:  Statute  apphes  only  to  the  Uabihty  of  members 
of  the  association  as  such.  May  sue  association  and  individual  mem- 
bers in  same  action  on  a  personal  Habihty  of  the  member.  April  v. 
Baird,  52  N.  Y.  S.  973,  32  App.  Div.  226,  28  N.  Y.  Civ.  Proc.  29. 

24  Hawke  v.  Cigar  Makers'  Union,  58  N.  Y.  S.  412. 

Apart  from  statute  an  unincorporated  fire  company  cannot  sue  in 
the  name  of  its  foreman  and  recover  possession  of  an  engine  from  an- 
other fire  company.  Statute  did  not  apply  here.  Masterson  v.  Botts, 
4  Abb.  Pr.  (N.  Y.)  130. 

Under  certain  statutes  an  association  could  not  sue  as  the  real  party 
in  interest  under  an  express  trust  created  by  the  statutes  because  the 
statute  gave  the  rights  to  the  members  of  the  association  as  individuals, 
and  not  as  an  association.    Corning  v.  Greene,  23  Barb.  (N.  Y.)  33,  45. 

26  Tracy  v.  Banker,  170  Mass.  266,  49  N.  E.  308. 

26  Appeal  of  Baylor,  93  S.  C.  414,  77  S.  E.  59. 

2^  Printed  copy  of  minutes  of  meetings  identified  by  secretary  of 
church  were  properly  admitted.    Godfrey  v.  Walker,  42  Ga.  562,  571. 

Opinion  of  officers  as  to  meaning  of  by-laws  inadmissible  when 
free  from  ambiguity.  Brendon  v.  Worley,  28  N.  Y.  S.  557,  8  Misc. 
253. 

Under  by-laws  no  dissolution  of  association  should  occur  so  long  as 
sixty  voted  to  maintain  it,  in  an  action  arising  out  of  an  attempt  of  the 
majority  to  consohdate,  evidence  of  members  voting  against  consoh- 
dation  should  have  been  admitted.  Rosenthal  v.  Reinfeld,  96  N.  Y.  S. 
199,  48  Misc.  652. 

Testimony  of  a  witness  as  to  the  number  of  members  of  a  congrega- 
tion that  desired  affiUation  with  a  certain  church  organization  held  im- 
properly excluded.  Dochkus  v.  Lithuanian  Soc,  206  Pa.  St.  25,  30,  55 
Atl.  779. 

28  Francis  v.  Perry,  144  N.  Y.  S.  167,  82  Misc.  271. 

313 


§  70]  NON-PROFIT  ASSOCIATIONS  [Chap.  V 

by-laws,  oral  evidence  as  to  the  manner  of  its  organ- 
ization and  its  membership  were  admitted.-^ 

On  the  issue  whether  a  certain  book  was  a  church 
record  or  a  private  memorandum  of  the  pastor,  the 
court  said:  ''It  appears  that  during  the  whole  time  it 
was  kept,  Dr.  Puffer  was  the  minister  of  the  parish  and 
pastor  of  the  church,  that  the  book  was  kept  wholly  or 
principally  by  him,  and  that  the  pastor  is  the  proper 
officer  to  keep  such  a  record.  On  inspection,  it  appears 
to  be  a  regular  statement,  in  proper  form  for  a  record, 
of  the  admission  of  members,  the  choice  of  officers,  and 
the  transaction  of  the  ordinary  business  of  the  church. 
We  must  take  notice  of  a  usage  so  general  as  that  of 
a  church  to  keep  a  record.  It  is  also  to  be  considered, 
that  the  law  recognizes  the  existence  and  organization 
of  a  church  as  an  aggregate  body,  takes  notice  of  its 
acts  and  doings  and  annexes  thereto  various  civil  rights 
and  powers.  It  is  in  virtue  of  this  organization  and 
these  proceedings  that  deacons  are  elected;  and  being 
thus  elected,  they  are  empowered  and  qualified  by  the 
law  to  sue  as  a  corporation.  The  law  therefore  does, 
by  necessary  implication,  authorize  and  require  a 
church,  by  a  proper  officer,  to  keep  some  record  of  its 
acts."    The  book  was  held  a  church  record.^** 

29  Haden  v.  Clark,  10  N.  Y.  S.  291,  32  N.  Y.  St.  478. 

30  Sawyer  v.  Baldwin,  11  Pick.  492,  493. 


314 


APPENDIX  OF  FORMS 

Note 

It  seems  desirable  in  connection  with  a  work  on  the  law 
of  associations  intended  primarily  for  use  by  practitioners 
to  include  forms  of  the  indentures  of  trust  which  are  used 
by  modern  business  organizations.  A  collection  of  such  forms 
is  therefore  printed  in  tliis  appendix.  In  using  them,  how- 
ever, the  reader  should  bear  in  mind  that  owing  to  the  great 
flexibility  of  this  form  of  organization  the  trust  instru- 
ments under  which  they  are  instituted  are  of  great  variety 
and  usually  contain  some  modification  made  with  a  view  to 
the  peculiar  circumstances  of  the  enterprise  to  be  under- 
taken in  a  given  instance.  For  this  same  reason,  however, 
it  is  difficult  to  prepare  normal  forms  suitable  for  use  with- 
out change  under  all  circumstances.  It  has  seemed  best, 
therefore,  to  print  in  this  appendix  copies  of  instruments 
which  have  actually  been  used.  These  will  serve  to  illus- 
trate for  the  reader  the  land  of  association  referred  to  in  the 
text  and  the  essential  features  of  each  will  be  readily  iden- 
tified by  one  desiring  to  frame  a  new  instrument  along  the 
same  lines. 

The  forms  herein  are  of  three  sorts.  The  trust  deed  of 
the  original  Standard  Oil  Trust  (Appendix  p.  318)  is  in- 
cluded chiefly  for  historical  reasons  because  it  was  one  of 
the  first  of  these  instruments  to  come  under  the  review  of 
the  courts.  It  is  also  interesting  to  compare  this  early 
form  with  the  more  highly  developed  modern  forms.  It  is 
the  instrument  referred  to  in  State  v.  Standard  Oil  Co., 
49  Ohio  St.  137  and  Rice  v.  Rockefeller,  134  N.  Y.  174. 
The  deed  of  the  original  sugar  trust  will  be  found  in  People 
V.  North  River  Sugar  Refineries,  102  N.  Y.  582.  There 
are  also  included  the  indentures  of  trust  which  were  before 
the  Court  in  some  of  the  important  recent  cases.  These 
instruments  are  not  printed  in  full  in  the  reports  of  the 
opinions  of  the  Court  but  are  found  in  the  original  papers. 

315 


APPENDIX   OF   FORMS 

Since  thej'  are  inaccessible  to  most  attorneys  it  seems  de- 
sirable to  print  them  here  because  the  distinction  between 
partnership  and  trust  as  laid  down  in  the  recent  cases  de- 
pends upon  the  form  these  instruments  have  taken.  These 
are  the  Coplej-  Square  Trust  (Appendix  p.  329)  passed  on 
in  the  case  of  Wilhams  v.  Boston,  208  ]\Iass.  497;  the  Park 
Square  Trust  (AppendLx  p.  342)  passed  on  in  the  case  of 
"Wilhams  v.  Johnson,  208  ]Mass.  544;  the  Boston  Personal 
Property  Trust  (Appendix  p.  352)  passed  on  in  the  case  of 
Williams  v,  jMilton,  215  ]Mass.  1;  and  the  declaration  of 
trust  and  "by-laws"  passed  on  in  the  case  of  Frost  v. 
Thompson,  219  :Mass.  360  (Appendix  p.  363). 

In  addition  to  these  are  printed  a  form  of  indenture  of 
trust  for  a  holding  company  holding  securities  of  public 
ser\'ice  corporations  (Boston  Suburban  Electric  Companies, 
Appendix  p.  373);  a  manufacturing  company  (The  Ludlow 
^Manufacturing  Associates,  Appendix  p.  388);  a  form  of  in- 
denture of  trust  for  the  construction  and  ownership  and 
management  of  a  building  (Blank  Hotel  Trust,  Appendix 
p.  400) ;  and  a  form  for  an  industrial  enterprise  (The  North 
American  Companies,  Appendix  p.  424).  In  connection 
with  these,  forms  for  limitation  of  liability  to  be  inserted  in 
leases  (Appendix  p.  454)  and  bonds  (Appendix  p.  455)  are 
included.  The  forms  for  resignation  and  appointment  of 
new  trustees  are  simple  and  easily  drawn  by  reference  to 
the  terms  of  the  particular  instrument  of  trust.  It  is  highly 
important,  however,  that  the  draftsman  should  assure  him- 
self that  the  procedure  strict^  conforms  to  the  require- 
ments of  the  trust  instrument.  It  is  usually  required  where 
real  estate  is  involved  that  a  formal  certificate,  or  certifi- 
cates, showing  the  change  of  trustee  be  recorded  in  the 
appropriate  registry'-  of  deeds.  These  also  are  simple  in- 
struments forms  for  which  are  printed  (Appendix  p.  361), 
but  it  is  essential  that  they  follow  strictly  the  terms  of  the 
indenture  of  trust,  otherwise  much  annoyance  will  be  caused 
in  future  examinations  of  title. 

In  connection  with  the  use  of  these  forms  it  is  important 
for  the  practitioner  to  bear  in  mind  that  even  in  Massa- 
chusetts, where  the  law  has  been  most  fully  developed,  the 
application  of  the  distinction  between  partnership  and  trust 
to  the  different  provisions  of  these  instruments  is  not  yet 
entirely  clear,  and  that  most  of  the  forms  now  in  use,  in- 

31G 


NOTE 

eluding  most  of  those  printed  herein,  are  of  date  prior  to  the 
decision  of  WiUiams  v.  Milton,  215  Mass.  1,  and  all  of  them 
prior  to  Frost  v.  Thompson,  219  Mass.  360,  the  latter  case 
apparently  holding  that  power  to  remove  trustees  at  any 
time  and  appoint  successors  and  to  amend  the  declara- 
tion of  trust  when  vested  in  shareholders  are  sufficient  to 
make  the  shareholders  partners  and  not  mere  beneficiaries 
to  the  trust.  (All  of  these  cases  are  discussed  in  Sec.  14). 
The  indenture  of  the  Boston  Personal  Property  Trust, 
which  is  a  somewhat  unusual  form  (Appendix  p.  352),  is 
the  only  one  which  has  been  distinctly  held  to  be  a  trust  and 
not  a  partnership.  In  that  same  case  there  was  a  dictum 
that  the  declaration  of  trust  of  the  Park  Square  Trust 
(Appendix  p.  342)  was  a  trust  and  not  a  partnership,  al- 
though in  the  case  of  Williams  v.  Johnson,  208  Mass.  544, 
there  had  been  a  previous  dictum  that  this  same  declara- 
tion created  a  partnership.  The  tendency  probably  will  be 
either  to  eliminate  the  right  of  association  of  shareholders 
in  meetings  or  to  substitute  for  the  power  to  direct  and  re- 
move trustees  and  terminate  the  trust  by  affirmative  vote 
binding  on  the  trustees,  authority  to  the  trustees  to  do  these 
acts  with  the  consent  of  the  shareholders  expressed  by  vote 
at  a  meeting. 

The  form  of  bond  of  the  Blank  Electric  Companies  (Ap- 
pendix p.  455)  is  an  attempt  to  avoid  the  objection  that  an 
obligation  payable  out  of  a  specific  fund  is  not  negotiable. 
It  is  made  payable  to  a  named  person  who  assigns  it  in  blank. 
The  holder  who  filled  in  his  name  would  at  least  have 
prima  facie  title  in  an  action  on  it. 

There  is  also  printed  herein  a  form  of  constitution  and  by- 
laws of  a  famous  social  club.  It  is  on  forms  such  as  these 
that  are  based  the  great  variety  of  instruments  organizing 
non-profit  associations. 


317 


STANDARD   OIL  TRUST 

(State  V.  Standard  Oil  Co.,  49  Ohio  St.  137;  Rice  v.  Rockefeller,  134 
N.  Y.  174) 

This  Agreement,  made  and  entered  upon  this  second 
day  of  January,  a.d.  1882,  by  and  between  all  the  persons 
who  shall  now  or  may  hereafter  execute  the  same  as  par- 
ties thereto,  witnesseth: 

I.  It  is  intended  that  the  parties  to  this  agreement  shall 
embrace  three  classes,  to-wit: 

1.  All  the  stockholders  and  members  of  the  following  cor- 
porations and  limited  partnerships,  to-wit: 

Acme  Oil  Company  (New  York);  Acme  Oil  Company 
(Pennsylvania);  Atlantic  Refining  Company,  of  Phila- 
delphia; Bush  &  Co.,  limited;  Camden  Consohdated  Oil 
Company;  Elizabethport  Acid  Works;  Imperial  Refining 
Company,  limited;  Chas.  Pratt  &  Co.;  Paine,  Ablett  & 
Co.,  limited;  Standard  Oil  Company  (Ohio);  Standard  Oil 
Company  (Pittsburg);  Smith's  Ferry  Oil  Trans.  Company; 
Solar  Oil  Company,  limited;  Stone  &  Fleming  Manufac- 
turing Company,  limited. 

Also,  all  the  stockholders  and  members  of  such  other  cor- 
porations and  limited  partnerships  as  may  hereafter  join 
in  this  agreement  at  the  request  of  the  trustees  herein  pro- 
vided for. 

2.  The  following  individuals,  to-wit: 

W.  C.  Andrews,  Jno.  D.  Archbold,  Lide  K.  Arter,  J.  A. 
Bostwick,  Benj.  Brewster,  D.  Bushnoll,  Thos.  C.  Bushncll, 
J.  N.  Camden,  Henry  L.  Davis,  li.  M.  Flagler,  Mrs.  H.  M. 
Flagler,  H.  M.  Harma  and  Geo.  W.  Chapin,  D.  M.  Harkness, 
D.  H.  Harkness,  trustee,  S.  V.  Harkness,  John  Huntington, 
H.  A.  Hutchiiis,  Chas.  F.  G.  Heye,  O.  B.  Jennings,  Chas. 
Lockhart,  A.  M.  McGregor,  Wm.  H.  Macy,  Wm.  H.  Macy, 
Jr.,  Estate  of  Josiah  Macy,  Jr.,  Wm.  H.  Macy,  Jr.,  execu- 
tor, O.  H.  Payne,  0.  H.  Payne,  trustee,  Chas.  Pratt,  Horace 

318 


STANDARD   OIL  TRUST 

A.  Pratt,  C.  M.  Pratt,  A.  J.  Pouch,  John  D.  Rockefeller, 
Wm.  Rockefeller,  Henry  H.  Rogers,  W.  P.  Thompson,  J.  J. 
Vandergrift,  William  T.  Wardwell,  W.  G.  Warden,  Jos.  L. 
Warden,  Warden,  Frew  &  Co.,  Louise  C.  Wheaton,  Julia  H. 
York,  and  Geo.  H.  Vilas,  M.  R.  Keith,  and  Geo.  F.  Chester, 
trustees. 

Also,  all  such  individuals  as  may  hereafter  join  in  this 
agreement  at  the  request  of  the  trustees  herein  provided 
for. 

3.  A  portion  of  the  stockholders  and  members  of  the 
following  corporations  and  limited  partnerships,  to-wit: 

American  Lubricating  Oil  Co.,  Baltimore  United  Oil 
Co.,  Beacon  Oil  Co.,  Bush  &  Denslow  Manufacturing  Co., 
Central  Refining  Co.,  of  Pittsburg,  Chesebrough  Manu- 
facturing Co.,  Chess  Carley  Co.,  Consolidated  Tank  Line 
Co.,  Inland  Oil  Co.,  Keystone  Refining  Co.,  Maverick 
Oil  Co.,  National  Transit  Co.,  Portland  Kerosene  Oil  Co., 
Producers'  Consolidated  Land  and  Petroleum  Co.,  Signal 
Oil  Works,  limited,  Thompson  &  Bedford  Co.,  limited, 
Devoe  Manufacturing  Co.,  Eclipse  Lubricating  Oil  Co., 
limited,  Empire  Refining  Co.,  limited,  Franklin  Pipe  Co., 
limited.  Galena  Oil  Works,  limited,  Galena  Farm  Oil  Co., 
limited,  Germania  Mining  Co.,  Vacuum  Oil  Co.,  H.  C. 
Van  Tine  &  Co.,  limited,  and  Waters-Pierce  Oil  Co. 

Also,  stockholders  and  members  (not  being  all  thereof) 
of  other  corporations  and  limited  partnerships  who  may 
hereafter  join  in  this  agreement  at  the  request  of  the  trus- 
tees herein  provided  for. 

II.  The  parties  hereto  do  covenant  and  agree  to  and  with 
each  other,  each  in  consideration  of  the  mutual  covenants 
and  agreements  of  the  others,  as  follows: 

1.  As  soon  as  practicable,  a  corporation  shall  be  formed 
in  each  of  the  following  states  under  the  laws  thereof,  to-wit : 
Ohio,  New  York,  Pennsylvania  and  New  Jersey;  provided, 
however,  that  instead  of  organizing  a  new  corporation,  any 
existing  charter  and  organization  may  be  used  for  the  pur- 
pose when  it  can  advantageously  be  done. 

2.  The  purposes  and  powers  of  said  corporation  shall 
be  to  mine  for,  produce,  manufacture,  refine  and  deal  in 
petroleum  and  all  its  products  and  all  the  materials  used  in 
such  businesses,  and  transact  other  business  collateral 
thereto.    But  other  purposes  and  powers  shall  be  embraced 

319 


APPENDIX   OF   FORMS 

in  the  several  charters,  such  as  shall  seem  expedient  to  the 
parties  procuring  the  charter,  or,  if  necessary  to  comply 
with  the  law,  the  powers  aforesaid  may  be  restricted  and 
reduced. 

3.  At  any  time  hereafter,  when  it  may  seem  advisable  to 
the  trustees  herein  provided  for,  similar  corporations  may 
be  formed  in  other  states  and  territories. 

4.  Each  of  said  corporations  shall  be  known  as  the  Stan- 
dard Oil  Company  of  (and  here  shall  follow 
the  name  of  the  state  or  territor}^  by  virtue  of  the  laws  of 
which  said  corporation  is  organized). 

5.  The  capital  stock  of  each  of  said  corporations  shall 
be  fixed  at  such  an  amount  as  may  seem  necessary  and  ad- 
visable to  the  parties  organizing  the  same,  in  view  of  the 
purpose  to  be  accomplished. 

6.  The  shares  of  stock  of  each  of  said  corporations  shall 
be  issued  only  for  money,  property  or  assets,  equal  at  a  fair 
valuation  to  the  par  value  of  the  stock  deHvered  therefor. 

7.  All  of  the  property,  real  and  personal,  assets  and 
business  of  each  and  all  of  the  corporations  and  limited 
partnerships  mentioned  or  embraced  in  class  first  shall  be 
transferred  to  and  vested  in  the  said  several  Standard  Oil 
Companies.  All  of  the  property,  assets  and  business  in, 
or  of,  each  particular  state,  shall  be  transferred  to  and  vested 
in  the  Standard  Oil  Company  of  that  particular  state,  and 
in  order  to  accomplish  such  purpose,  the  directors  and 
managers  of  each  and  all  of  the  several  corporations  and 
limited  partnerships  mentioned  in  class  first,  are  hereby 
authorized  and  directed  by  the  stockholders  and  mem- 
bers thereof  (all  of  them  being  parties  to  this  agreement), 
to  sell,  assign,  transfer,  convey  and  make  over,  for  the 
consideration  hereinafter  mentioned,  to  the  Standard  Oil 
Company  or  companies  of  the  proper  state  or  states,  as 
soon  as  said  corporations  are  organized  and  ready  to  receive 
the  same,  all  the  property,  real  and  personal,  assets  and 
business  of  said  corporations  and  limited  partnerships. 
Correct  schedules  of  such  property,  assets  and  business  shall 
accompany  each  transfer. 

8.  The  individuals  embraced  in  class  second  of  this  agree- 
ment do  each  for  liimself  agree,  for  the  consideration  here- 
inafter mentioned,  to  sell,  assign,  transfer,  convey  and  set 
over  all  the  property,  real  and  personal,  assets  and  business 

320 


STANDARD   OIL  TRUST 

mentioned  and  embraced  in  schedules  accompanying  such 
sale  and  transfer  to  the  Standard  Oil  Company  or  companies, 
of  the  proper  state  or  states,  as  soon  as  the  said  corpora- 
tions are  organized  and  ready  to  receive  the  same. 

9.  The  parties  embraced  in  class  third  of  this  agreement 
do  covenant  and  agree  to  assign  and  transfer  all  of  the 
stock  held  by  them  in  the  corporations  or  limited  partner- 
ships herein  named,  to  the  trustees  herein  provided  for, 
for  the  consideration  and  upon  the  terms  hereinafter  set 
forth.  It  is  understood  and  agreed  that  the  said  trustees 
and  their  successors  may  hereafter  take  the  assignment  of 
stocks  in  the  same  or  similar  companies  upon  the  terms 
herein  provided,  and  that  whenever  and  as  often  as  all  the 
stocks  of  any  corporation  or  Hmited  partnership  are  vested 
in  said  trustees,  the  proper  steps  may  then  be  taken  to  have 
all  the  money,  property,  real  and  personal,  of  such  cor- 
poration or  partnership  assigned  and  conveyed  to  the 
Standard  Oil  Company  of  the  proper  state,  on  the  terms  and 
in  the  mode  herein  set  forth,  in  which  event  the  trustees 
shall  receive  stocks  of  the  Standard  Oil  Companies  equal 
to  the  value  of  the  money,  property  and  business  assigned, 
to  be  held  in  place  of  the  stocks  of  the  company  or  com- 
panies assigning  such  property. 

10.  The  consideration  for  the  transfer  and  conveyance 
of  the  money,  property  and  business  aforesaid  to  each  or  any 
of  the  Standard  Oil  Companies,  shall  be  stock  of  the  respec- 
tive Standard  Oil  Company  to  which  said  transfer  or  con- 
veyance is  made,  equal  at  par  value  to  the  appraised  value 
of  the  money,  property  and  business  so  transferred.  Said 
stock  shall  be  delivered  to  the  trustees  hereinafter  provided 
for,  and  their  successors,  and  no  stock  of  any  of  said  com- 
panies shall  ever  be  issued  except  for  money,  property  or 
business  equal  at  least  to  the  par  value  of  the  stock  so  issued, 
nor  shall  any  stock  be  issued  by  any  of  said  companies  for 
any  purpose,  except  to  the  trustees  herein  provided  for, 
to  be  held  subject  to  the  trusts  hereinafter  specified. 
It  is  understood,  however,  that  this  provision  is  not  in- 
tended to  restrict  the  purchase,  sale  and  exchange  of 
property  by  said  Standard  Oil  Companies  as  fully  as  they 
may  be  authorized  to  do  by  their  respective  charters,  pro- 
vided only  that  no  stock  be  issued  therefor  except  to  said 
trustees. 

321 


APPENDIX  OF  FORMS 

II.  The  consideration  for  any  stocks  delivered  to  said 
trustees  as  above  pro\aded  for,  as  well  as  for  stocks  delivered 
to  said  trustees  by  persons  mentioned  or  included  in  class 
third  of  tliis  agreement,  shall  be  the  delivery  by  said  trus- 
tees to  the  persons  entitled  thereto,  of  trust  certificates 
hereinafter  provided  for,  equal  at  par  value  to  the  par  value 
of  the  stocks  of  the  said  Standard  Oil  Companies  so  received 
by  said  trustees,  and  equal  to  the  appraised  value  of  the 
stocks  of  other  companies  or  partnerships  delivered  to  said 
trustees.  (The  said  appraised  value  shall  be  determined 
in  a  manner  agreed  upon  by  the  parties  in  interest  and  the 
said  trustees.)  It  is  understood  and  agreed,  however,  that 
the  said  trustees  may,  with  any  trust  funds  in  their  hands,  in 
addition  to  the  mode  above  provided,  purchase  the  bonds 
and  stocks  of  other  companies  engaged  in  business  similar 
or  collateral  to  the  business  of  said  Standard  Oil  Companies, 
on  such  terms  and  in  such  mode  as  they  may  deem  advisable, 
and  shall  hold  the  same  for  the  benefit  of  the  owners  of  said 
trust  certificates,  and  may  sell,  assign,  transfer  and  pledge 
such  bonds  and  stocks  whenever  they  may  deem  it  advan- 
tageous to  said  trust  so  to  do. 

III.  The  trusts  upon  which  said  stocks  shall  be  held, 
and  the  number,  powers  and  duties  of  said  trustees,  shall 
be  as  follows: 

1.  The  number  of  trustees  shall  be  nine. 

2.  J.  D.  Rockefeller,  O.  H.  Payne  and  Wm.  Rockefeller 
are  hereby  appointed  trustees,  to  hold  their  ofiice  until  the 
first  Wednesday  of  April,  a.d.  1885. 

3.  J.  A.  Bostwick,  H.  M.  Flagler  and  W.  G.  Warden 
are  hereby  appointed  trustees,  to  hold  their  office  until  the 
first  Wednesday  of  April,  a.d.  1884. 

4.  Chas.  Pratt,  Benj.  Brewster  and  Jno.  D.  Archbold 
are  hereby  appointed  trustees,  to  hold  their  office  until  the 
first  Wednesday  of  April,  a.d.  1883. 

5.  Elections  for  trustees  to  succeed  those  herein  appointed 
shall  be  held  annually,  at  which  election  a  sufficient  number 
of  trustees  shall  be  elected  to  fill  all  vacancies  occurring  either 
from  expiration  of  the  term  of  the  office  of  trustee  or  from 
any  other  cause.  All  trustees  sluiU  be  elected  to  hold  their 
office  for  three  years,  except  those  elected  to  fill  a  vacancy 
arising  from  any  cause,  except  expiration  of  term,  who 
shall  be  elected  for  the  balance  of  the  term  of  the  trustee 

322 


STANDARD   OIL   TRUST 

whose  place  they  are  elected  to  fill.     Every  trustee  shall 
hold  his  office  until  his  successor  is  elected. 

6.  Trustees  shall  be  elected  by  ballot  by  the  owners  of 
trust  certificates  or  their  proxies.  At  all  meetings  the  owners 
of  trust  certificates,  who  may  be  registered  as  such  on  the 
books  of  the  trustees,  may  vote  in  person  or  by  proxy  and 
shall  have  one  vote  for  each  and  every  share  of  trust  cer- 
tificates standing  in  their  names,  but  no  such  owner  shall 
be  entitled  to  vote  upon  any  share  which  has  not  stood  in 
his  name  thirty  days  prior  to  the  day  appointed  for  the  elec- 
tion. The  transfer  books  may  be  closed  for  thirty  days  im- 
mediately preceding  the  annual  election.  A  majority  of  the 
shares  represented  at  such  election  shall  elect. 

7.  The  annual  meeting  of  the  owners  of  the  said  trust 
certificates  for  the  election  of  trustees,  and  for  other  business, 
shall  be  held  at  the  office  of  the  trustees,  in  the  city  of 
New  York,  on  the  first  Wednesday  of  April  of  each  year, 
unless  the  place  of  meeting  be  changed  by  the  trustees, 
and  said  meeting  may  be  adjourned  from  day  to  day  until  its 
business  is  completed.  Special  meetings  of  the  owners  of 
said  trust  certificates  may  be  called  by  the  majority  of  the 
trustees  at  such  times  and  places  as  they  may  appoint.  It 
shall  also  be  the  duty  of  the  trustees  to  call  a  special  meet- 
ing of  holders  of  trust  certificates  whenever  requested  to  do 
so  by  a  petition  signed  by  the  holders  of  ten  per  cent,  in 
value  of  such  certificates.  The  business  of  such  special 
meetings  shall  be  confined  to  the  object  specified  in  the  no- 
tice given  therefor.  Notice  of  the  time  and  place  of  all 
meetings  of  the  owners  of  trust  certificates  shall  be  given, 
by  personal  notice  as  far  as  possible,  and  by  pubKc  notice 
in  one  of  the  principal  newspapers  of  each  state,  in  which  a 
Standard  Oil  Company  exists,  at  least  ten  days  before  such 
meeting.  At  any  meeting,  a  majority  in  value  of  the  hold- 
ers of  trust  certificates  represented  consenting  thereto,  by- 
laws may  be  made,  amended  and  repealed,  relative  to  the 
mode  of  election  of  trustees  and  other  business  of  the  hold- 
ers of  trust  certificates,  provided,  however,  that  said  by- 
laws shall  be  in  conformity  with  this  agreement.  By-laws 
may  also  be  made,  amended  and  repealed  at  any  meeting, 
by  and  with  the  consent  of  a  majority  in  value  of  the  holders 
of  trust  certificates,  which  alter  this  agreement  relative  to 
the  number,  powers  and  duties  of  the  trustees,  and  to  other 

323 


APPENDIX   OF  FORMS 

matters  tending  to  the  more  efficient  accomplishment  of  the 
objects  for  which  the  trust  is  created,  provided  only  that 
the  essential  intents  and  purposes  of  this  agreement  be  not 
thereby  changed. 

8.  Whenever  a  vacancy  occurs  in  the  board  of  trustees 
more  than  sixty  days  prior  to  the  annual  meeting  for  the 
election  of  trustees,  it  shall  be  the  duty  of  the  remaining 
trustees  to  call  a  meeting  of  the  owners  of  Standard  Oil 
Trust  certificates  for  the  purpose  of  electing  a  trustee  or 
trustees  to  fill  the  vacancy  or  vacancies.  If  any  vacancy 
occurs  in  the  board  of  trustees,  from  any  cause,  within  sixty 
daj^s  of  the  date  of  the  annual  meeting  for  the  election  of 
trustees,  the  vacancy  may  be  filled  by  a  majority  of  the 
remaining  trustees,  or,  at  their  option,  may  remain  vacant 
until  the  annual  election. 

9.  If,  for  any  reason,  at  any  time,  a  trustee  or  trustees 
shall  be  appointed  by  any  court  to  fill  any  vacancy  or  va- 
cancies in  said  board  of  trustees,  the  trustee  or  trustees  so 
appointed  shall  hold  his  or  the  respective  office  or  offices 
only  until  a  successor  or  successors  shall  be  elected  in  the 
manner  above  provided  for. 

10.  Whenever  any  change  shall  occur  in  the  board  of 
trustees,  the  legal  title  to  the  stock  and  other  property  held 
in  trust  shall  pass  to  and  vest  in  the  successors  of  said  trus- 
tees without  any  formal  transfer  thereof.  But  if  at  any  time 
such  formal  transfer  shall  be  deemed  necessary  or  advisable, 
it  shall  be  the  duty  of  the  board  of  trustees  to  obtain  the 
same,  and  it  shall  be  the  duty  of  any  retiring  trustee  or 
the  administrator  or  executor  of  any  deceased  trustee  to 
make  said  transfer. 

11.  The  trustees  shall  prepare  certificates  which  shall 
show  the  interest  of  each  beneficiary  in  said  trust,  and  de- 
liver them  to  the  persons  properly  entitled  thereto.  They 
shall  be  divided  into  shares  of  the  par  value  of  one  hundred 
dollars  each,  and  shall  be  known  as  Standard  Oil  Trust 
certificates,  and  shall  be  issued  subject  to  all  the  terms  and 
conditions  of  this  agreement.  The  trustees  shall  have  power 
to  agree  upon  and  direct  the  form  and  contents  of  said  certifi- 
cates, and  the  mode  in  which  they  shall  be  signed,  attested 
and  transferred.  The  certificates  shall  contain  an  express 
stipulation  that  the  holders  thereof  shall  be  bound  by  the 
terms  of  this  agreement  and  by  the  by-laws  herein  provided  for. 

324 


STANDARD   OIL  TRUST 

12.  No  certificates  shall  be  issued  except  for  stocks  and 
bonds  held  in  trust,  as  herein  provided  for,  and  the  par 
value  of  certificates  issued  by  said  trustees  shall  be  equal  to 
the  par  value  of  the  stocks  of  said  Standard  Oil  Companies, 
and  the  appraised  value  of  other  bonds  and  stocks  held  in 
trust.  The  various  bonds,  stocks  and  monies  held  under  said 
trust  shall  be  held  for  all  parties  in  interest  jointly,  and  the 
trust  certificates  so  issued  shall  be  the  evidence  of  the  in- 
terest held  by  the  several  parties  in  this  trust.  No  duplicate 
certificates  shall  be  issued  by  the  trustees,  except  upon  sur- 
render of  the  original  certificate  or  certificates  for  cancella- 
tion, or  upon  satisfactory  proof  of  the  loss  thereof,  and  in 
the  latter  case  they  shall  require  a  sufficient  bond  of  in- 
demnity. 

13.  The  stocks  of  the  various  Standard  Oil  Companies 
held  in  trust  by  said  trustees,  shall  not  be  sold,  assigned  or 
transferred  by  said  trustees,  or  by  the  beneficiaries,  or  by 
both  combined,  so  long  as  this  trust  endures.  The  stocks  and 
bonds  of  other  corporations,  held  by  said  trustees,  may  be 
by  them  exchanged  or  sold  and  the  proceeds  thereof  dis- 
tributed pro  rata  to  the  holders  of  trust  certificates,  or  said 
proceeds  may  be  held  and  reinvested  by  said  trustees  for 
the  purposes  and  uses  of  the  trust;  provided,  however, 
that  said  trustees  may,  from  time  to  time,  assign  such 
shares  of  stock  of  said  Standard  Oil  Companies  as  may  be 
necessary  to  quaUfy  any  person  or  persons,  chosen,  or  to  be 
chosen  as  directors  and  officers  of  any  of  said  Standard  Oil 
Companies. 

14.  It  shall  be  the  duty  of  said  trustees  to  receive  and 
safely  to  keep  all  interest  and  dividends  declared  and  paid 
upon  any  of  the  said  bonds,  stocks  and  monies  held  by  them 
in  trust,  and  to  distribute  all  monies  received  from  such 
sources  or  from  sales  of  trust  property  or  otherwise,  by  de- 
claring and  paying  dividends  upon  the  Standard-Trust 
certificates  as  funds  accumulated,  which,  in  their  judgment, 
are  not  needed  for  the  uses  and  expenses  of  said  trust.  The 
trustees  shall,  however,  keep  separate  accounts  of  receipts 
from  interest  and  dividends,  and  of  receipts  from  sales  or 
transfers  of  trust  property,  and  in  making  any  distribution 
of  trust  funds,  in  which  monies  derived  from  sales  or  trans- 
fers shall  be  included,  shall  render  the  holders  of  trust 
certificates  a  statement  showing  what  amount  of  the  fund 

325 


APPENDIX   OF   FORMS 

distributed  has  been  derived  from  such  sales  or  transfers. 
The  said  trustees  may  be  also  authorized  and  empowered  by 
a  vote  of  a  majority  in  value  of  holders  of  trust  certificates, 
whenever  stocks  or  bonds  have  accumulated  in  their  hands 
from  monej'  purchases  thereof,  or  the  stocks  or  bonds  held 
by  them  have  increased  in  value,  or  stock  dividends  shall 
have  been  declared  by  any  of  the  companies  whose  stocks 
are  held  by  said  trustees,  or  whenever,  from  any  such  cause, 
it  is  deemed  advisable  so  to  do,  to  increase  the  amount  of 
trust  certificates  to  the  extent  of  such  increase  or  accumula- 
tion of  values,  and  to  divide  the  same  among  the  persons  then 
owning  trust  certificates  pro  rata. 

15.  It  shall  be  the  duty  of  said  trustees  to  exercise  gen- 
eral supervision  over  the  affairs  of  said  several  Standard  Oil 
Companies,  and  as  far  as  practicable,  over  the  other  com- 
panies or  partnerships,  any  portion  of  whose  stock  is  held  in 
said  trust.  It  shall  be  their  duty  as  stockholders  of  said 
companies  to  elect  as  directors  and  officers  thereof,  faith- 
ful and  competent  men.  They  may  elect  themselves  to 
such  positions  when  they  see  fit  so  to  do,  and  shall  en- 
deavor to  have  the  affairs  of  said  companies  managed  and 
directed  in  the  manner  they  may  deem  most  conducive  to 
the  best  interests  of  the  holders  of  said  trust  certificates. 

16.  All  the  powers  of  the  trustees  may  be  exercised  by 
a  majority  of  their  number.  They  may  appoint  from  their 
own  number  an  executive  and  other  committees.  A  major- 
ity of  each  committee  shall  exercise  all  the  powers  which 
the  trustees  may  confer  upon  such  committee. 

17.  The  trustees  may  employ  and  pay  all  such  agents 
and  attorneys  as  they  deem  necessary  in  the  management 
of  said  trust. 

18.  Each  trustee  shall  be  entitled  to  a  salary  for  his  serv- 
ices not  exceeding  twenty-five  thousand  dollars  per  annum, 
except  the  president  of  the  board,  who  may  be  voted  a  salary 
not  exceeding  thirty  thousand  dollars  per  annum,  which 
salaries  shall  be  fixed  by  said  board  of  trustees.  All  salaries 
and  expenses  connected  with,  or  growing  out  of  the  trust, 
shall  be  paid  by  the  trustees  from  the  trust  fund. 

19.  The  board  of  trustees  shall  have  its  principal  office 
in  the  city  of  New  York,  unless  changed  by  vote  of  the 
trustees,  at  which  office  or  in  some  place  of  safe  deposit  in 
said  city,  the  bonds  and  stocks  shall  be  kept.    The  trustees 

326 


STANDARD  OIL  TRUST 

shall  have  power  to  adopt  rules  and  regulations  pertaining 
to  the  meetings  of  the  board,  the  election  of  officers  and  the 
management  of  the  trust. 

20.  The  trustees  shall  render  at  each  annual  meeting, 
a  statement  of  the  affairs  of  the  trust.  If  a  termination  of 
the  trust  be  agreed  upon  as  hereinafter  provided,  or  within 
a  reasonable  time  prior  to  its  termination  by  lapse  of  time, 
the  trustees  shall  furnish  to  the  holders  of  the  trust  certifi- 
cates a  true  and  perfect  inventory  and  appraisement  of  all 
stocks  and  other  property  held  in  trust,  and  a  statement  of 
the  financial  affairs  of  the  various  companies  whose  stocks 
are  held  in  trust. 

21.  This  trust  shall  continue  during  the  fives  of  the  sur* 
vivors  and  survivor  of  the  trustees  in  tliis  agreement  named 
and  for  twenty-one  years  thereafter;  provided,  however, 
that  if  at  any  time  after  the  expiration  of  ten  years,  two- 
thirds  of  all  the  holders  in  value,  or  if  after  the  expiration 
of  one  year,  ninety  per  cent,  of  all  the  holders  in  value  of 
trust  certificates  shall,  at  a  meeting  of  holders  of  trust  cer- 
tificates called  for  that  purpose,  vote  to  terminate  this 
trust  at  some  time  to  be  by  them  then  and  there  fixed,  the 
said  trust  shall  terminate  at  the  date  so  fixed.  If  the  hold- 
ers of  trust  certificates  shall  vote  to  terminate  the  trust 
as  aforesaid,  they  may,  at  the  same  meeting  or  at  a  sub- 
sequent meeting  called  for  that  purpose,  decide  by  a  vote  of 
two-thirds  in  value  of  their  number  the  mode  in  which  the 
affairs  of  the  trust  shall  be  wound  up,  and  whether  the  trust 
property  shall  be  distributed  or  whether  it  shall  be  sold  and 
the  values  thereof  distributed,  or  whether  part,  and  if  so, 
what  part,  shall  be  divided  and  what  part  shall  be  sold,  and 
whether  such  sales  shall  be  public  or  private.  The  trustees, 
who  shall  continue  to  hold  their  offices  for  that  purpose, 
shall  make  the  distribution  in  the  mode  directed,  or,  if  no 
mode  be  agreed  upon  by  two-thirds  in  value  as  aforesaid, 
the  trustees  shall  make  distribution  of  the  trust  property 
according  to  law.  But  said  distribution,  however  made, 
and  whether  it  be  of  property,  or  values,  or  of  both,  shall 
be  just  and  equitable,  and  such  as  to  insure  to  each  owner  of 
a  trust  certificate  his  due  proportion  of  the  trust  property 
or  the  value  thereof. 

22.  If  the  trust  shall  be  terminated  by  expiration  of  the 
time  for  which  it  is  created,  the  distribution  of  the  trust 

327 


APPENDIX   OF  FORMS 

property  shall  be  directed  and  made  in  the  mode  above 
provided. 

23.  This  agreement,  together  with  the  registry  of  cer- 
tificates, books  of  accounts,  and  other  books  and  papers 
connected  with  the  business  of  said  trust,  shall  be  safely 
kept  at  the  principal  office  of  said  trustees. 

(Signatures  omitted.) 


328 


B 

COPLEY   SQUARE   TRUST 

(Williams  v.  Boston,  208  Mass.  497) 
Underwriting  Subscription  Agreement 

With  Moses  Williams,  J.  Morris  Meredith,  and  John  P.  Rey- 
nolds, Junior,  and  their  successors,  trustees  under  the  Copley 
Square  Trust  Agreement,  a  copy  of  which  is  attached  hereto 
marked  "B,"  for  shares  of  the  Copley  Square  Trust, 

In  consideration  of  an  underwriting  commission  of  two 
(2)  per  cent,  to  be  paid  to  each  subscriber  on  the  amount 
by  him  hereto  underwritten  and  subscribed,  —  said  com- 
mission to  be  payable  at  the  time  of  the  payment  by  the 
trustees  to  the  Museum  of  Fine  Arts  of  the  first  instalment 
of  the  purchase  money  under  their  contracts  for  the  pur- 
chase of  the  Museum  of  Fine  Arts  property,  copies  of  which 
contracts  are  appended  hereto,  marked  ''C"  and  ''D"  re- 
spectively, —  and  in  order  to  enable  said  Trustees  to  enter 
into  and  perform  said  contracts  "C"  and  "D,"  each  of  the 
parties  who  have  set  their  names  hereto  hereby  subscribes 
for  the  number  of  shares  set  opposite  his  signature,  but  only 
upon  the  following  terms  and  subject  to  the  following  limi- 
tations, namely:  — 

The  total  initial  issue  of  shares  is  to  be  twenty  thousand 
(20,000)  shares,  of  the  par  value  of  one  hundred  (100)  dol- 
lars each,  and  this  agreement  is  to  be  operative  and  binding 
only  if  said  twenty  thousand  (20,000)  shares  are  subscribed 
hereunder.  The  shares  are  to  be  paid  for  in  four  instal- 
ments, as  follows :  — 

First  instalment  June  15th,  1902,  thirty-five  dollars  per  share 
Second       "  June  15th,  1904,  twenty-five     "        "   __    " 

Third         "  June  15th,  1906,        "        "       "        "        "   ' 

'  Fourth       "  June  15th,  1907,  1908,  or  1909, 

as  the  Trustees  may  determine  to  be  necessary 
to  enable  them  to  make  payment  of  the  final  in- 
stalment of  the  purchase  price  under  said  con- 
tracts ''C"  and  "D,"  fifteen  dollars  per  share. 
329 


APPENDIX   OF  FORMS 

Each  subscriber  agrees  for  himself  and  his  representatives 
to  pay  to  the  Trustees  said  first  instalment  of  thirty-five 
(35)  per  cent,  due  June  15,  1902,  on  the  niunber  of  shares 
by  him  subscribed  hereunder.  On  the  pajonent  of  said  first 
subscription  instalment,  scrip  therefor  denoting  thirty-five 
(35)  per  cent,  paid  will  be  issued  by  the  Trustees.  Said 
scrip  shall  represent  the  interest  of  the  holder  in  the  shares 
subscribed  for  by  him  and  shall  be  transferable  on  the  books 
of  the  Trustees.  All  scrip  issued  shall  refer  on  its  face  to  this 
agreement,  and  shall  contain  a  stipulation  that  by  accept- 
ance thereof  the  holder  accepts  the  provisions  of  this  agree- 
ment in  relation  thereto. 

For  pajmient  of  the  subsequent  subscription  instalments 
the  Trustees  shall  call  from  time  to  time  upon  each  scrip- 
holder  of  record  at  the  time  the  call  is  made  by  sending  at 
least  ten  (10)  days'  written  notice  by  mail,  postage  prepaid 
to  his  address  on  their  books.  Upon  each  such  call,  each 
scrip-holder  shall  have  the  option  either  of  paying  with 
respect  to  the  shares  for  which  he  has  scrip  the  subscription 
instalment  then  called  for  pajnnent  or  of  permittiDg  his 
scrip  ownership  and  his  interest  in  the  shares  represented 
thereby  to  lapse. 

If  he  duly  meets  the  call,  he  shall  on  surrender  of  his  old 
scrip  receive  new  scrip  sho^^^ng  the  total  percentage  paid 
up,  and  on  payment  of  the  call  for  the  last  instalment  he 
shall  receive  full  paid  certificates  of  shares  under  said  trust 
agreement. 

Upon  failure  by  any  scrip-holder  to  pay  any  subscription 
instalment,  continued  for  thirty  days  after  written  notice 
duly  mailed  to  him  as  above  provided,  his  scrip  ownership 
shall  lapse,  and  thereupon  the  scrip  then  standing  in  his 
name  on  the  books  of  the  Trustees  shall  vest  in  said  Museum 
of  Fine  Arts  in  accordance  wth  the  "Agreement  as  to  Lapse 
of  Scrip"  appended  hereto,  which  forms  a  part  of  this  agree- 
ment, and  all  sums  already  paid  to  the  Trustees  by  any  per- 
son upon  the  shares  represented  by  said  scrip  shall  be  for- 
feited to  the  Trustees  for  the  benefit  of  the  Museiun  as 
owner  of  the  lapsed  scrip,  and  all  right  of  the  former  scrip- 
holder  to  the  shares  represented  by  such  scrip  shall  cease 
and  become  vested  in  said  Museum. 

All  scrip  when  issued  shall  bear  interest  on  the  amount 
paid  up  at  the  rate  of  four  (4)  per  cent,  per  annum,  payable 

330 


COPLEY  SQUARE  TRUST 

semi-annually  July  1st  and  January  1st  until  the  last  in- 
stalment of  the  purchase  price  for  said  property  bought 
from  said  Museum  of  Fine  Arts  under  said  contracts  "C" 
and  "D"  has  been  paid. 

It  is  intended  that  this  agreement  and  said  Trust  Agree- 
ment shall  take  effect  simultaneously,  and  only  in  the  event 
that  said  Trustees  shall  execute  said  contracts  "C"  and 
"D"  with  said  Museum  of  Fine  Arts. 

Witness  the  signatures  and  common  seal  of  the  subscribers 
this day  of A.D.  1902. 

Signatures.  Number  of  Shares  Address. 

Approval  and  Acceptance  by  Trustees 

The  provisions  of  the  foregoing  underwriting  subscription 
agreement  are  hereby  approved  and  the  subscriptions  there- 
under are  accepted,  said  contracts  "C"  and  "D"  with  the 
Museum  of  Fine  Arts  for  the  purchase  of  its  property  hav- 
ing been  executed  simultaneously  herewith. 

(Signatures) 
As  Trustees  of  the  Copley  Square  Trust, 
But  Not  Individually. 


"B" 

Agreement  as  to  Lapse  of  Scrip 

As  part  of  the  transactions  above  set  forth,  and  in  con- 
sideration thereof,  said  Trustees  as  Trustees  of  the  Copley 
Square  Trust,  but  not  individually,  and  said  Museum  of 
Fine  Arts  agree  with  each  other  as  follows:  — 

The  Trustees  agree  to  notify  in  writing  the  Museum  of 
every  lapse  of  ownership  of  scrip  under  the  terms  of  the 
above  underwriting  subscription  agreement,  and  to  issue 
to  the  Museum  new  scrip  therefor  upon  satisfaction  of  the 
default  thereon  as  next  provided.  The  Museum  agrees  that 
it  will  within  ten  days  after  such  notice  at  its  option  either 
pay  to  the  Trustees  the  subscription  instalment  in  default 
on  such  scrip  or  apply  the  amount  of  such  subscription  in- 
stalment toward  the  payment  of  any  instalment  of  the  pur- 
chase money  then  due,  or,  if  none  is  due,  upon  the  instal- 

331 


APPENDIX   OF   FORMS 

ment  next  thereafter  becoming  due,  interest  to  be  adjusted; 
and  thereafter,  as  each  successive  subscription  instalment 
falls  due,  it  will  at  its  option,  so  pay  the  sum  to  the  Trustees 
or  apply  the  same  on  said  purchase  money  so  long  as  it  re- 
mains the  owner  and  holder  of  such  scrip. 

If,  after  due  notice  has  been  sent  to  the  Museum,  as  above 
provided,  of  a  lapse  of  ownership  to  any  scrip  or  calling  for 
the  payment  of  any  subscription  instalments  on  such  scrip 
already  belonging  to  the  Museum,  as  in  the  foregoing  under- 
writing subscription  agreement  provided,  the  Museum  neg- 
lects for  ten  days  to  make  such  payment,  the  amount 
unpaid  on  said  scrip  or  the  amount  of  the  subscription  instal- 
ment so  called  for,  as  the  case  may  be,  shall,  without  further 
acts  of  the  parties,  be  applied  as  a  partial  payment  on  any 
instalment  of  the  purchase  money  then  due,  or,  if  none  is 
due,  upon  the  instalment  next  thereafter  becoming  due, 
interest  to  be  adjusted. 

Any  lapsed  scrip  issued  to  the  Museum  shall  be  transfer- 
able by  the  Museum,  and,  when  transferred,  shall  again  be 
subject  to  the  provisions  of  the  original  agreement  appli- 
cable to  all  scrip,  and  shall  be  taken  to  have  been  paid  up  to 
the  extent  to  which  subscription  instalments  have  been 
either  actually  paid  in  cash  or  have  been  applied  in  partial 
payments  of  instalments  of  purchase  money  as  above  pro- 
vided. 

The  Trustees  agree  to  warrant  and  defend  the  title  of  the 
Museum  to  all  lapsed  scrip  issued  to  it  mider  this  agree- 
ment, and  to  bear  all  the  expense  of  defending  said  title, 
and  in  case  the  holder  of  any  lapsed  scrip  for  which  the 
Trustees  have  issued  new  script  to  the  Museum  shall  estab- 
lish a  title  inconsistent  with  the  title  of  the  Museum  to  such 
new  scrip  said  Trustees  agree  to  indemnify  the  Museum 
against  all  loss  thereby,  including  the  payment  of  any  sum 
credited  on  the  purchase  money  in  respect  to  such  scrip, 
and  the  adjustment  of  interest. 

In  witness  whereof  the  Trustees  and  the  Museum  of  Fine 
Arts  have  executc^d  this  instrument,  and  said  Trustees  have 
affixed  their  seals  and  the  Museum  has  affixed  its  seal  hereto 
this day  of A.D.  1902,  said  Trustees  under- 
taking hereby  only  as  Trustees  of  the  Copley  Square  Trust, 
l;ut  n(jt  individually. 

332 


COPLEY  SQUARE   TRUST 

Copley  Square  Trust  Agreement 

Declaration  of  Trust  made  April  .  .  . ,  1902,  establishing 
the  Copley  Square  Trust,  for  the  purchase,  development,  and 
disposition  of  a  certain  parcel  of  land  with  the  buildings  there- 
on, situated  in  Boston,  Suffolk  County  and  Commonwealth  of 
Massachusetts,  and  bounded  and  described  as  follows :  — 

Description  of  Property.  Northerly  on  the  southerly 
line  of  St.  James  Avenue  as  laid  out  and  at  present  existing 
by  three  lines,  one  a  straight  line  measuring  25  feet,  another 
a  curved  line  drawn  with  a  radius  of  198  25-100  feet,  measur- 
ing 221  25-100  feet,  and  the  third  another  straight  line 
measuring  25  feet;  westerly  on  the  easterly  line  of  Dart- 
mouth Street,  350  feet;  southerly  on  the  northerly  line  of 
Stuart  Street,  260  feet;  and  easterly  on  the  westerly  line  of 
Trinity  Place,  350  feet.  Containing  95,268  square  feet  more 
or  less.  Subject  to  the  restrictions  and  provisions  so  far  as 
the  same  are  now  in  force,  imposed  by  an  indenture  between 
the  City  of  Boston  and  the  Museum  of  Fine  Arts,  dated 
October  26,  1899,  and  recorded  with  Suffolk  Deeds,  Libro 
2642,  Page  26,  and  by  an  Agreement  contained  in  deed  of 
said  City  to  said  Museum  of  Fine  Arts,  dated  September  15, 
1899,  recorded  with  said  Deeds,  Libro  2634,  Page  396. 

We  Moses  Williams  of  Brookline  in  the  County  of  Nor- 
folk in  said  Commonwealth,  J.  Morris  Meredith  of  said 
Boston,  and  John  P.  Reynolds,  Junior,  of  Milton  in  said 
County  of  Norfolk,  hereinafter  called  the  ''Trustees,"  be- 
ing about  to  make  —  simultaneously  with  the  execution 
hereof  —  the  contracts  with  the  Museum  of  Fine  Arts,  a 
Massachusetts  Corporation,  for  the  purchase  of  the  prop- 
erty above  described,  copies  of  which  contracts  are  on  file 
with  the  Old  Colony  Trust  Co.  of  Boston,  declare  that  we 
will,  and  our  heirs,  executors,  administrators  and  assigns 
shall,  hold  said  contracts  and  said  property  when  conveyed 
to  us  and  all  monies  and  other  property  which  may  be  re- 
ceived by  the  Trustees  hereunder  on  the  following  trusts  for 
the  benefit  of  the  holders  from  time  to  time  of  the  scrip  and 
shares  hereinafter  described. 

Title  of  Trustees.  1.  The  title  of  the  Trustees  here- 
under shall  be  "Trustees  of  the  Copley  Square  Trust,"  and 

333 


APPENDIX   OF   FORMS 

this  instniment  may  be  referred  to  as  the  "Copley  Square 
Trust  Agreement." 

The  word  "Trustee"  or  "Trustees"  wherever  used  in  this 
instrument  shall  be  taken  to  mean  the  trustee  or  trustees  for 
the  time  being,  howsoever  appointed,  except  where  it  is 
otherwise  pro\'ided. 

Gexer-\l  Purposes.  2.  The  general  purposes  of  the  trust 
are  to  make  and  carry  out  said  contracts  -u-ith  the  ^Museum  of 
Fine  Arts  for  the  purchase  of  the  property  above  described,  and 
to  manage  and  develop  said  property- as  hereinafter  pro%'ided. 

Capital  S2,000,000.  3.  The  beneficial  mterest  in  the 
trust  shall  be  divided  into  equal  shares,  each  representing 
one  hundred  (100)  dollars  paid  in.  The  Trustees  shall  issue 
to  the  several  persons  beneficially  interested  certificates 
stating  the  number  of  shares  to  the  extent  of  which  said  per- 
sons are  interested,  and  amounting  in  the  aggregate  to  the 
total  amount  paid  in  by  the  beneficiaries.  The  total  author- 
ized issue  shall  be  limited  to  twenty  thousand  (20,000)  shares, 
aggregating  two  million  (2,000,000)  dollars;  and  the  num- 
ber of  shares  shall  not  at  any  time  be  increased  beyond  said 
twenty  thousand  (20,000)  shares  except  pursuant  to  a  vote 
of  the  shareholders  as  hereinafter  pro\'ided. 

Form  of  Certificate.  4.  The  certificates  of  shares  to  be 
issued  by  the  Trustees  shall  be  substantially  in  the  follo'OTiig 
form :  — 

"Certificate  No ....  Shares. 

Copley  Square  Trust 

"  This  is  to  certify  that is  the  owner  of  ...  . 

of  the  equal  shares  of  One  Hundred  Dollars  each  of  the  Cop- 
ley Square  Trust,  under  the  Declaration  of  Trust  b}-  ]\Ioses 
Williams,  J.  Morris  Meredith,  and  John  P.  Reynolds,  Junior, 
dated  April  .  .  . ,  1902  and  recorded  with  Suffolk  Deeds, 
Book  .  .  .  . ,  Page  ....  By  acceptance  of  this  certificate  the 
holder  accepts  and  becomes  bound  by  the  terms  of  said 
Declaration  of  Trust. 

"Said  shares  are  transferable  only  by  assignment  duly 
recorded  on  the  books  of  the  Trustees,  upon  surrender  of 
this  certificate  properl}-  endorsed. 

"Witness  the  signatures  of  the  Trustees  of  said  trust  this 

day  of 19... 

"Trustees  of  the  Copley  Square  Trust." 
334 


COPLEY  SQUARE  TRUST 

Transfer  of  Certificates.  5.  The  share  certificates 
and  the  scrip  hereinafter  provided  for  issued  by  the  Trus- 
tees shall  be  the  muniments  and  evidence  of  the  interest  of 
the  shareholders  hereunder.  They  shall  be  transferable 
only  on  the  books  of  the  Trustees  upon  their  surrender  duly 
endorsed  or  with  the  consent  of  the  Trustees  in  some  other 
way  given,  and  the  acceptance  of  a  certificate  for  shares  or 
scrip  shall  make  the  person  therein  named  as  shareholder  or 
scrip-holder  bound  by  this  instrument. 

New  Shares.  6.  The  shareholders  may  by  vote  at  a 
meeting  duly  called  for  the  purpose  increase  from  time  to 
time  the  number  of  shares  to  be  issued  hereunder  by  the 
Trustees.  The  holders  of  such  new  shares  shall  be  interested 
hereunder  equally  with  the  holders  of  the  shares  first  issued. 
Such  new  shares  shall  not  be  issued  for  less  than  one  hun- 
dred dollars  actually  paid  in  cash,  or  its  equivalent  in  the 
judgment  of  the  Trustees.  In  the  issue  of  any  such  new 
shares  the  right  to  subscribe  shall  (unless  the  Trustees  shall 
determine  upon  some  other  method  as  being  more  advan- 
tageous for  the  trust)  be  offered  pro  rata  to  the  then  share- 
holders. 

Issue  of  Shares  and  Scrip.  7.  The  Trustees  shall  issue 
the  first  twenty  thousand  shares,  and  all  new  shares  author- 
ized by  the  shareholders,  from  time  to  time  as  payment  is 
made  for  them  under  the  terms  of  such  subscription  con- 
tracts as  shall  to  the  Trustees  seem  proper  for  ensuring  the 
prompt  payment  of  the  subscriptions.  The  Trustees  shall 
issue  scrip  upon  pajonent  of  the  first  subscription  instal- 
ments in  such  form  and  upon  such  terms  as  they  deem  proper 
and  thereafter  upon  payment  of  each  succeeding  subscription 
instalment  new  scrip  in  place  of  that  previously  issued. 

Underwriting  of  Subscriptions,  Promotion,  etc..  Ex- 
penses. 8.  The  Trustees  are  empowered  to  procure  under- 
writing subscriptions  for  said  twenty  thousand  shares,  and 
at  the  time  of  paying  to  the  Museum  of  Fine  Arts  the  first 
instalme'nt  of  the  purchase  money  under  said  contracts  with 
it  for  the  purchase  of  said  property,  the  Trustees  shall  pay 
to  each  subscriber  to  the  underwriting  subscription  agree- 
ment for  said  twenty  thousand  shares  two  per  cent,  on  the 
amount  of  his  subscription  as  an  underwriting  commission, 
and  shall  also  pay  to  Meredith  &  Grew  of  Boston  —  to  be 

335 


APPENDIX  OF  FORMS 

apportioned  by  them  among  themselves  and  others  as  already- 
agreed  upon  —  $30,000,  as  the  entire  compensation  for 
forming  this  Trust  and  raising  the  capital. 

Payments  to  Museum.  9.  Out  of  the  monies  which 
come  to  them  under  this  instrument  the  Trustees  shall  pay 
the  purchase  price  instalments  required  under  said  con- 
tracts with  said  Museum  of  Fine  Arts. 

Powers  of  Trustees.  10.  The  Trustees  shall  have 
power  to  pay  for  the  services  of  counsel  in  the  organization 
of  this  trust,  the  preparation  of  this  instrument,  the  exami- 
nation of  the  title  to  the  real  estate  above  described,  and 
the  general  management  of  the  trust;  to  pay  the  necessary 
expenses  of  the  management  of  the  trust,  including  compen- 
sations to  such  clerks,  agents,  and  brokers  as  they  deem 
necessary,  including,  if  in  their  judgment  it  be  necessary  or 
wise,  the  payment  of  brokers'  commissions  for  the  market- 
ing of  any  of  the  shares  or  scrip  held  by  the  underwriters  or 
by  said  Museum  of  Fine  Arts,  and  such  architects,  engineers, 
and  other  persons  as  they  may  think  best  for  furnishing  ad- 
vice or  plans  for  the  development  of  the  property  above 
described;  to  invest  any  monies  in  their  hands  in  such 
securities  as  are  at  the  time  permitted  as  investments  to 
trustees  under  the  laws  of  Massachusetts  and  said  securities 
to  sell  or  pledge  at  any  time  on  such  terms  and  for  such  con- 
siderations as  seem  to  them  proper.  They  shall  have  full 
power  to  make  any  agreements  and  any  expenditures  they 
may  think  advisable  in  connection  with  the  straightening 
or  altering  of  the  boundary  lines  of  said  property  and  the 
removal  of  restrictions  on  the  premises.  The  Trustees  shall 
have  full  power  —  in  addition  to  the  powers  enumerated 
above  —  to  proceed  in  their  discretion  and  at  any  time  or 
times  with  the  development  of  the  property  in  the  manner 
which  may  be,  in  their  opinion,  best  calculated  to  advance 
the  interests  of  the  shareholders,  and  to  that  end  the  Trustees 
shall  have  power  to  sell,  mortgage,  and  lease  the  property  in 
whole  or  in  part  on  such  terms  as  to  them  shall  seem  proper, 
including  the  right  to  mortgage  the  property  to  secure  part 
of  the  purchase  money  as  provided  in  their  contract  with 
the  Museum  of  Fine  Arts,  and  no  purchaser  from  them  shall 
be  bound  to  see  to  the  appli(!ation  of  the  purchase  money; 
to  borrow  money,  giving  therefor  their  notes  as  Trustees 
with  or  without  collateral;  to  contract  as  Trustees  for  the 

33G 


COPLEY   SQUARE  TRUST 

erection  upon  the  premises  of  such  buildings  as  seem  to 
them  proper;  to  acquire  for  the  benefit  of  the  trust  and  on 
such  terms  as  seem  to  them  proper  the  shares  or  other  securi- 
ties in  any  corporations  or  associations  which  may  be  or- 
ganized for  the  purpose  of  developing  any  part  of  the  prop- 
erty; to  make  from  time  to  time  distributions  on  account 
of  capital,  and  at  any  time  in  their  discretion  to  liquidate 
and  wind  up  the  trust  and  distribute  the  net  proceeds  among 
the  shareholders  of  record.  It  is,  however,  expressly  stipu- 
lated that  before  engaging  in  any  plan  which  will,  in  their 
judgment,  require  additional  capital,  the  Trustees  shall  at 
a  meeting  of  the  shareholders  as  herein  provided  obtain 
authority  to  issue  the  further  shares  necessary  to  raise  such 
additional  capital. 

Compensation  of  Trustees.  11.  Until  said  completion 
of  the  purchase  of  said  property,  the  Trustees  shall  receive 
as  compensation  for  their  services  fifteen  hundred  (1500) 
dollars  per  annum  for  each  Trustee,  in  addition  to  the  usual 
five  per  cent,  commission  (to  be  divided  among  the  three) 
on  the  income  of  the  monies  invested  by  them  (including  as 
income  all  interest  paid  by  the  Museum  of  Fine  Arts  on  the 
instalment  payments  of  the  purchase  price  under  said  con- 
tracts with  it),  and  thereafter  the  compensation  of  each 
Trustee  shall  be  fifteen  hundred  dollars  per  armum,  or  one- 
third  of  five  per  cent,  on  the  trust  income,  whichever  is  the 
larger.  Should  the  Trustees  erect  any  buildings  on  the  land 
of  said  trust,  they  are  to  receive  two  per  cent.,  to  be  divided 
among  them,  on  the  total  cost  of  any  such  buildings  for  their 
services  in  supervising  the  designing  of  the  plans  for  the 
same  and  the  construction. 

Dividends.  12.  Until  the  purchase  of  said  property 
from  the  Museum  of  Fine  Arts  under  said  contract  appended 
hereto  has  been  completed  by  the  delivery  of  deed  and  pos- 
session as  in  said  contract  provided,  the  Trustees  shall  pay 
dividends  or  interest  on  the  shares  and  scrip  from  time  to 
time  outstanding  at  the  rate  of  four  per  cent,  per  annum, 
on  the  amounts  from  time  to  time  paid  up  thereon,  payable 
semi-annually,  July  1st  and  January  1st;  and  all  such  pay- 
ments and  also  all  other  payments  made  prior  to  the  com- 
pletion of  said  purchase  in  excess  of  the  income  actually 
received  shall  be  considered  a  part  of  the  cost  of  said  property. 

337 


APPENDIX   OF   FORMS 

After  said  purchase  has  been  completed,  the  Trustees 
shall  from  time  to  time  declare  and  pay  such  di\'idends  out 
of  income  as  seem  to  them  proper;  and  the  Trustees  shall 
have  full  power  to  determine  what  is  income  and  what  is 
principal, 

Li^nxATioxs  ox  Trustees'  Powers.  13.  The  Trustees 
shall  have  no  power  to  bind  the  shareholders  personally, 
and  in  ever}'  written  contract  into  which  the}^  shall  enter 
reference  shall  be  made  to  this  Declaration  of  Trust;  and 
the  party  contracting  with  the  Trustees  shall  look  only  to 
the  funds  and  property  of  the  trust  for  the  pa\Tnent  of  any 
liabilitj'  and  obligation  under  the  contract,  and  neither  the 
Trustees  nor  the  shareholders,  present  or  future,  under  this 
instrument,  shall  be  personally  liable  therefor. 

Reser^'e  Fuxd.  14.  The  Trustees  may  establish  a  re- 
serve fund  for  future  contingencies,  and  for  that  purpose  may 
set  aside  and  invest  annually  such  sum  as  to  them  seems 
proper  out  of  the  income;  and  such  reserv'e  fund  thej'  may 
in  their  discretion  distribute  in  whole  or  part  as  income  at 
any  later  time. 

Trustees'  Accounts.  15.  The  Trustees  shall  keep  or 
cause  to  be  kept  proper  books  which  shall  at  all  reasonable 
times  be  open  to  inspection  by  smy  shareholder.  They  shall 
each  year  make  a  financial  report  to  the  shareholders. 

Resignation,  Removal,  and  Appointment  of  Trus- 
tees. 16.  Any  Trustee  maj^  by  written  instrument  signed, 
acknowledged,  and  recorded  in  the  Suffolk  County  Registry 
of  Deeds,  resign  his  office. 

Any  vacancy  in  the  number  of  Trustees  may  be  filled  by 
the  remaining  Trustees  by  a  written  instrument  signed,  ac- 
knowledged, and  recorded  as  aforesaid,  and  such  appoint- 
ment shall  be  final  unless  and  until  revoked  b}^  the  vote  of 
the  shareholders.  A  Trustee  so  appointed  shall  have  all 
the  powers  and  duties  of  his  predecessor.  The  acting  Trus- 
tees for  the  time  being,  whether  sur\'i\'ing  or  remaining, 
shall  have  all  the  powers  and  discretions  of  the  original 
Trustees.  Upon  resignation,  decease,  incapacity,  removal, 
or  vacancy  for  any  cause,  the  title  of  the  outgoing  Trustee 
shall  vesl  in  the  remaining  Trustees,  and  upon  the  filling 
of  any  vacancy  the  title  to  the  whole  trust  property  shall 
vest  jointly  in  those  who  shall  then  be  Trustees  hereunder. 

338 


COPLEY   SQUARE   TRUST 

The  Trustees  shall  be  responsible  only  for  wilful  breach  of 
trust;  and  no  Trustee  shall  be  liable  for  allowing  one  or 
more  of  their  number  to  have  possession  of  the  trust  books 
or  to  make  collections,  or  to  have  the  sole  custody  of  the 
trust  monies,  and  no  Trustee  shall  be  responsible  except  for 
his  own  acts.  No  bond  or  surety  or  sureties  shall  ever  be 
required  of  any  trustee  acting  hereunder. 

When  any  Trustee  is  absent  from  said  Commonwealth  or 
unable  to  perform  his  duties  or  has  died,  the  remaining 
Trustees  or  Trustee  shall  have  the  power  to  act;  and  the 
certificates  of  the  remaining  Trustees  or  Trustee  as  to  such 
absence,  disability,  or  death  shall  be  conclusive  upon  all 
parties  in  interest. 

Nature  of  Shareholders'  Interest.  17.  No  title  or 
estate  in  any  property  at  any  time  held  by  the  Trustees 
hereunder  is  to  vest  in  the  shareholders,  but  the  same  shall 
be  and  remain  in  said  Trustees,  their  successors  and  assigns. 
The  sole  interest  of  each  shareholder  shall  be  in  the  obliga- 
tion of  the  Trustees  to  hold,  manage,  and  dispose  of  said 
property  and  to  account  for  its  income  and  proceeds  as  in 
this  instrument  provided. 

Death  of  Shareholder.  18.  The  death  of  any  share- 
holder shall  not  terminate  the  trust  nor  entitle  his  legal 
representatives  to  claim  an  account,  except  as  hereinbefore 
provided,  or  to  take  any  action  in  court  for  a  partition  or 
winding  up  or  otherwise  against  the  Trustees;  but  the  ex- 
ecutors, administrators,  or  assigns  of  the  decedent  shall 
succeed  to  all  the  rights  of  the  decedent  under  this  instru- 
ment upon  producing  his  certificate. 

Meetings  of  Shareholders.  19.  The  Trustees  may, 
whenever  they  see  fit,  call  meetings  of  the  shareholders ;  and 
they  shall  do  so  upon  the  written  request  of  the  holder  or 
holders  of  at  least  one-tenth  of  the  shares  outstanding.  Notices 
of  meetings  shall  be  given  by  the  Trustees  at  least  five  days  in 
advance  by  mailing  postage  prepaid  a  copy  to  each  share- 
holder to  the  last  address  furnished  by  him  to  the  Trustees, 
or  in  default  thereof  to  his  last  known  residence  or  place  of 
business.  Shareholders  may  attend  and  vote  in  person  or 
by  proxy,  and  each  share  shall  be  entitled  to  one  vote.  A 
majority  in  amount  of  the  shareholders  shall  constitute  a 
quorum.    Until  all  subscription  instalments  have  been  called 

339 


APPENDIX   OF   FORMS 

for  pa\T3ieiit  the  holders  of  scrip  from  time  to  time  outstand- 
ing who  are  not  in  default  as  to  any  instalment  shall  have 
all  the  rights  of  shareholders  under  this  instrument.  And  the 
words  shareholder  and  shareholders  shall  include  such  scrip- 
holders,  wherever  used  in  this  instrument,  unless  the  con- 
text makes  such  meaning  impossible. 

Instructions  and  Amendments  by  Shareholders. 
20.  By  a  vote  of  a  majority  in  value  of  the  shares 
outstanding,  the  shareholders  may  from  time  to  time  au- 
thorize or  instruct  the  Trustees  in  any  manner,  may 
remove  any  Trustee  and  appoint  another  in  his  place  with 
the  same  effect  as  provided  in  Article  16  and  may  alter 
or  amend  this  Declaration  of  Trust,  but  not  so  as  to  subject 
the  Trustees  or  shareholders  to  any  personal  liability 
or  to  affect  the  previously  acquired  rights  hereunder  of 
any  person  other  than  the  Trustees  or  shareholders.  No 
such  action,  and  no  removal  or  appointment  of  Trustees, 
shall  affect  any  person  other  than  the  Trustees  or  share- 
holders, not  having  actual  notice  thereof,  until  recorded  in 
the  Suffolk  Count}^  Registry  of  Deeds. 

Recording  New  Matter.  21,  Any  paper  signed  by  the 
Trustees  and  a  copy  of  the  record  of  any  of  the  proceedings 
of  the  shareholders,  certified  by  the  Trustees,  which  it  may 
be  deemed  desirable  to  record  in  the  Registry  of  Deeds,  may 
be  acknowledged  by  any  one  of  the  Trustees,  in  the  manner 
prescribed  for  the  acknowledgment  of  deeds;  and  such  paper 
or  copy  duly  recorded  shall  be  conclusive  evidence  of  the 
facts  therein  stated  and  of  the  regularity  of  the  meeting. 

Winding  Up  by  Vote.  22.  Whenever  three-fourths  in 
value  of  the  shareholders  shall  in  writing  or  by  vote  so  direct, 
the  Trustees  shall  liquidate  and  %vind  up  the  trust  and  dis- 
tribute the  proceeds  among  the  shareholders  or  shall  con- 
vey the  trust  property  as  by  such  writing  or  vote  directed, 
and  thereupon  the  Trustees  shall  be  under  no  further  liability. 

Winding  up  by  Limitations.  23.  This  trust  shall,  un- 
less sooner  terminated  as  above  provided,  continue  for 
twenty  years  after  the  death  of  the  last  survivor  of  the  fol- 
lowing persons: — 

Moses  Williams,  Junior,  Hugh  Williams,  Mary  E.  Wil- 
liams, (Constance  M.  Williams,  and  Gladys  Williams,  chil- 
dren of  said  Moses  Williams;  Frederick  C.  Bowditch,  Junior, 

340 


COPLEY   SQUARE  TRUST 

Edward  F.  Bowditch,  and  Elizabeth  H.  Bowditch,  children 
of  Frederick  C.  Bowditch,  of  said  Brookline;  Priscilla  M. 
Reynolds  and  John  P.  Reynolds,  3d,  children  of  said  John 
P.  Reynolds,  Junior;  Thomas  Gorham,  son  of  Robert  S. 
Gorham,  of  Newton,  in  the  County  of  Middlesex  and  said 
Commonwealth;  and  Elliott  Perkins,  son  of  Thomas  Nel- 
son Perkins,  of  Westwood,  in  said  County  of  Norfolk. 

In  Witness  Whereof  we,  the  said  Trustees,  have  here- 
unto set  out  hands  and  common  seal  on  the  day  and  year 
first  above  written. 

Commonwealth  op  Massachusetts) 

Suffolk  |  ^^-  '      a.d.  1902. 

Then  personally  appeared  the  above  named  Moses  Wil- 
liams, J.  Morris  Meredith,  and  John  P.  Reynolds,  Junior, 
and  acknowledged  the   foregoing  instrument   to   be   their 
free  act  and  deed  as  trustees  as  aforesaid. 
Before  me 


Justice  of  the  Peace. 


341 


c 

PARK  SQUARE   REAL  ESTATE  TRUST 

(Williams  v.  Johnson,  208  Mass.  544;  WiUiams  v.  Boston,  208  Mass. 
497;   Williams  v.  Milton,  215  Mass.  1) 

This  Declaration  of  Trust,  made  this  fifteenth  day  of 
September  m  the  year  one  thousand  nine  hundred  and 
nine. 

WITNESSETH 

Whereas  the  New  York,  New  Haven  &  Hartford 
Railroad  Company,  a  corporation  duly  organized  under 
the  laws  of  the  Commonwealth  of  Massachusetts,  has  con- 
veyed to  Moses  Williams  of  Brookline,  Amory  A.  Lawrence, 
Alfred  Bowditch  and  Laurence  Minot  of  Boston,  all  of  the 
Commonwealth  of  Massachusetts,  by  deed  of  even  date  and 
to  be  recorded  herewith,  certain  real  estate  in  the  City  of 
Boston,  particularl}^  described  in  said  deed,  reference  to 
which  is  hereby  made,  to  be  held  by  them  upon  the  trusts 
hereinafter  set  forth. 

Now,  THEREFORE,  we,  the  said  Moses  Williams,  Amory 
A.  Lawrence,  Alfred  Bowditch  and  Laurence  Minot, 
do  hereby  declare  said  trusts  as  follows : 

1.  The  trustees  shall  forthwith  issue  certificates  in  sub- 
stantially the  form  hereinafter  set  forth  for  fifty-two  thou- 
sand shares  of  the  nominal  par  value  of  one  hundred  dollars 
each,  to  the  said  New  York,  New  Haven  &  Hartford 
Railroad  Company,  in  payment  for  the  real  estate  this 
day  conveyed  to  them.  The  entire  interest  of  the  cestuis 
que  irustent,  or  shareholders,  in  the  property  held  or  to  be 
held  by  the  trustees  is  represented  at  this  date  by  said 
fifty-two  thousand  shares  to  be  issued  as  above  provided. 
The  trustees  may  issue  certificates  in  substantially  the  form 
hereinafter  set  forth  for  not  exceeding  forty  thousand  addi- 
ti(jnal  shares  of  the  nominal  par  value  of  one  hundred  dollars 
each,  in  exchange  for  convertible  notes  or  bonds,  as  herein- 
after provided. 

342 


PARK  SQUARE   REAL   ESTATE   TRUST 

Form  of  Certificate 
No Shares. 

The  Trustees  of  the 
Park  Square  Real  Estate  Trust 

under  a  Declaration  of  Trust  dated  September  15,  1909, 
and  recorded  in  Suffolk  County  Registry  of  Deeds,  libro 
page..  .. 

Hereby  declare  that 

of is  the  owner  of shares 

of  the  nominal  par  value  of  one  hundred  dollars  each  under 
said  Declaration  of  Trust. 

The  shares  represented  by  this  certificate  may  be  trans- 
ferred on  the  books  of  the  said  trustees  in  accordance  with 
the  provisions  of  said  Declaration  of  Trust. 

Witness  our  hands  this day  of 

A.D 


■  Trustees. 


2.  The  said  shareholders  are  not  to  have  any  legal  title 
to  the  trust  property  itself,  real  or  personal,  held  from  time 
to  time  by  the  trustees,  and,  in  especial,  they  shall  have  no 
right  to  call  for  any  partition;  they  shall  have  no  equitable 
estate  in  the  lands  and  appurtenances  thereto  belonging 
constituting  the  trust  property,  but  their  interest  shall 
consist  only  of  an  interest  in  the  money  to  arise  from  the 
sale  or  other  disposition  thereof  by  the  trustees,  as  herein 
provided,  and  of  the  rights  herein  mentioned  previously 
to  such  sale,  and  the  shares  shall  be  personal  property  carry- 
ing the  rights,  as  herein  set  forth,  of  division  of  proceeds 
and  profits  and  the  other  rights  and  matters  concerning 
the  trust  property,  and  shall  be  transmissible  and  trans- 
ferable as  personal  estate. 

3.  The  death  of  a  shareholder  during  the  continuance 
of  this  trust  shall  not  operate  to  determine  the  trust,  nor 
shall  it  entitle  the  legal  representatives  of  a  deceased  share- 
holder to  an  account,  to  take  any  action  in  the  courts,  or 
otherwise,  against  the  trust  or  the  trustees;   but  the  execu- 

343 


APPENDIX   OF  FORMS 

tors,  administrators  or  assigns  of  the  deceased  shall  succeed 
to  all  rights  of  said  deceased  under  this  trust  upon  the  sur- 
render of  the  certificate  of  such  shares. 

4.  The  trustees  may,  from  time  to  time,  at  their  discre- 
tion, invite  and  receive  subscriptions  to  additional  shares 
at  the  price  of  not  less  than  one  hundred  dollars  each  for 
the  purpose  of  increasing  the  capital  of  the  trust,  giving 
preference,  upon  such  terms  and  conditions  as  they  shall 
deem  best,  to  existing  shareholders  and  to  the  holders  of 
convertible  notes  or  bonds.  All  subscriptions  shall  be  sub- 
ject to  the  terms  of  this  Declaration  of  Trust. 

5.  The  trustees  shall  issue  certificates  in  substantially  the 
form  hereinbefore  set  forth  for  each  sum  of  one  hundred  dol- 
lars, or  for  multiples  thereof,  paid  to  them  for  the  purchase 
of  additional  shares;  but  no  certificate  except  those  to  be 
forthwith  issued  hereunder  in  payment  for  the  real  estate 
this  day  conveyed  to  the  trustees  and  except  those  issued  and 
used  for  exchange  for  convertible  notes  or  bonds  as  herein 
elsewhere  provided,  shall  be  issued  for  any  less  sum  than  one 
hundred  dollars;  and  no  certificate  shall  be  issued  hereunder 
until  a  record  thereof  has  been  made  in  the  books  of  the 
trustees. 

6.  Shares  may  be  transferred  on  the  books  of  said  trustees 
by  the  person  named  in  the  certificate  thereof,  his  attorney 
or  legal  representative,  upon  the  surrender  of  the  certifi- 
cate, and  a  new  certificate  shall  be  issued  to  the  transferee, 
who  shall  thereupon  become  subject  to  the  terms  of  this 
Declaration  of  Trust. 

All  transfers  of  shares  shall  be  recorded  in  the  books  of  the 
trustees. 

The  words  "shareholder"  and  ''shareholders,"  wherever 
used  herein,  shall  be  construed  to  mean  those  who  are  for 
the  time  being  recorded  as  such  on  the  books  of  the  trustees, 
and  only  to  such  shall  the  trustees  be  responsible. 

7.  No  assessment  shall  ever  be  made  upon  the  sharehold- 
ers. 

8.  The  books  of  said  trustees  shall  always  be  open  to  the 
inspection  of  shareholders. 

9.  The  truste(^s  shall  have  no  power  to  bind  the  share- 
holders personally  and  all  persons  or  corporations  extending 
credit  to,  contracting  with  or  having  any  claim  against  the 
trustees,  shall  look  only  to  the  funds  and  property  of  the 

344 


PARK  SQUARE   REAL  ESTATE  TRUST 

trust  for  payment  under  such  contract  or  claim,  or  for  the 
payment  of  any  debt,  damage,  judgment  or  decree,  or  of 
any  money  that  may  otherwise  become  due  or  payable  to 
them  from  the  trustees,  so  that  neither  the  trustees  nor  the 
shareholders,  present  or  future,  shall  be  personally  liable 
therefor.  In  every  written  order,  contract  or  obligation 
which  the  trustees  shall  give  or  enter  into,  it  shall  be  the 
duty  of  the  trustees  to  refer  to  this  declaration  and  to  stipu- 
late that  neither  the  trustees  nor  the  shareholders  shall  be 
held  to  any  personal  liability  under  or  by  reason  of  such 
order,  contract  or  obligation. 

10.  The  trustees  shall  have  the  absolute  control  over  and 
disposal  of  all  real  estate  and  other  property  held  by  them 
at  any  time  under  this  trust,  including  the  power  to  im- 
prove the  real  estate  at  any  time  held  by  them  by  building 
thereon  or  otherwise,  to  sell  for  cash  or  credit  at  public  or 
private  sale,  and  to  take  back  mortgages  to  secure  the 
whole  or  any  part  of  the  purchase  price  of  any  real  estate 
sold  by  them,  and  to  assign  and  discharge  such  mortgages, 
to  mortgage  with  or  without  power  of  sale,  to  lease  or  hire 
for  improvement  or  otherwise  for  a  term  beyond  the  possi- 
ble termination  of  this  trust,  or  for  any  less  term,  to  let,  to 
exchange,  to  release  and  to  partition. 

They  may  represent  the  shareholders  and  the  trust  in  all 
suits  or  legal  proceedings  relating  to  the  trust  estate  in  any 
courts  of  law  or  equity,  or  before  other  bodies  or  tribunals, 
may  employ  counsel  and  commence  suits  or  proceedings, 
or  compromise,  or  submit  to  arbitration,  all  matters  of  dis- 
pute to  which  the  trust  or  the  trustees  may  be  a  party,  when 
in  their  judgment  considered  necessary  or  proper. 

11.  The  trustees  shall  have  power  to  borrow  money  from 
time  to  time  to  carry  out  the  purposes  of  this  trust,  and  the 
decision  of  the  trustees  as  to  what  constitute  such  purposes 
shall  be  final,  and  to  issue  their  promissory  notes  or  bonds, 
as  trustees  hereunder,  for  money  so  borrowed,  and  to  secure 
the  repayment  of  any  money  borrowed  by  a  pledge,  mort- 
gage or  hypothecation  of  the  trust  property  or  of  any  part 
thereof,  provided,  however,  that  no  trustee  nor  any  share- 
holder hereunder  shall  be  personally  liable  for  any  money 
so  borrowed,  and  that  in  every  promissory  note,  bond  and 
other  obligation  issued  by  the  trustees  hereunder,  they  shall 
refer  to  this  declaration  and  stipulate  against  personal  lia- 

345 


APPENDIX   OF  FORMS 

bility,  both  of  the  trustees  and  of  the  shareholders,  as  here- 
inbefore in  paragraph  9  hereof  set  forth.  The  total  in- 
debtedness of  the  trustees  for  money  borrowed  shall  not  at 
any  one  time  exceed  the  principal  sum  of  four  million  dol- 
lars ($4,000,000).  No  lender  of  money  to  the  trustees  shall 
be  bound  to  inquire  as  to  the  indebtedness  of  the  trustees 
to  any  other  person  or  persons,  nor  shall  any  such  lender  or 
purchaser  be  liable  for  the  application  of  money  loaned  or 
of  purchase  money. 

12.  The  trustees  may  from  time  to  time  issue  their  notes 
or  bonds  to  an  amount  not  exceeding  four  million  dollars, 
bearing  interest  at  a  rate  not  exceeding  four  per  centum  per 
annum,  secured  by  mortgage  of  the  whole  or  any  part  of  the 
trust  property,  and  convertible  into  shares  of  this  trust  on 
any  interest  day  prior  to  the  second  day  of  July,  in  the  year 
one  thousand  nine  hundred  and  nineteen,  on  the  basis  of 
ten  shares  of  the  nominal  par  value  of  one  hundred  dollars 
each  for  each  one  thousand  dollars  par  value  of  such  notes 
or  bonds,  ex  coupon  due  on  day  of  conversion,  and  they  may 
secure  by  the  same  mortgage  one  or  more  series  of  converti- 
ble notes  or  bonds  and  one  or  more  series  of  non-convertible 
notes  or  bonds.  The  face  value  of  any  notes  or  bonds  issued 
under  this  section  of  this  instrument  shall  be  reckoned  as  a 
part  of  the  total  sum  which  the  trustees  have  hereinbefore 
been  authorized  to  borrow. 

13.  The  trustees  may  acquire  by  purchase  or  otherwise 
any  real  estate,  or  any  interest  therein,  in  the  general 
vicinity  of  that  this  day  conveyed  to  them  (and  the  judg- 
ment of  the  trustees  as  to  what  constitutes  general  vicinity 
shall  be  final),  and  any  notes,  bonds,  shares  or  other  securi- 
ties of  any  corporation,  association  or  real  estate  trust, 
organized  or  adapted  for  the  purpose  of  acquiring,  holding, 
managing  or  improving  real  estate,  or  for  the  purpose  of 
conducting  a  lighting,  heating,  power  or  other  business 
directly  related  to  the  management  of  real  estate,  if  in  their 
judgment  such  acquisition  will  in  any  manner  tend  to 
facilitate  the  laying  out,  developing,  management  or  im- 
provement of  the  real  estate  this  day  conveyed  to  them. 
The  trustees  may  lay  out  and  construct  or  discontinue  any 
streets  or  ways  upon  any  property  at  any  time  held  by  them. 
The  trustees  may  dedicate  to  any  public  use,  or  convey  to 
the  city  of  Boston,  with  or  without  compensation  therefor, 

340 


PARK   SQUARE   REAL   ESTATE   TRUST 

such  part  or  parts  of  any  property  at  any  time  held  by  them 
as,  in  their  judgment,  will  enhance  the  value  of  their  re- 
maining property  (any  property  which  may  have  been  sold 
with  an  agreement  for  such  dedication  or  conveyance  being 
deemed  a  part  of  such  remaining  property  for  this  purpose) 
to  a  degree  equal  to  or  greater  than  the  value  of  the  part  or 
parts  thereof  so  dedicated  or  conveyed  (and  the  judgment 
of  the  trustees  as  to  the  extent  of  such  enhancement  shall 
be  final  and  shall  be  conclusively  evidenced  by  any  act  of 
dedication  to  any  pubhc  use  or  any  deed  of  conveyance  to 
said  city  of  Boston).  The  trustees  may  contribute  money 
or  other  property  to  the  cost  of  any  public  or  quasi  public 
undertaking,  which  in  their  judgment  will  be  advantageous 
to  the  trust  property.  The  powers  given  the  trustees  in 
this  section  of  this  instrument  shall  be  construed  as  given 
in  addition  to  any  powers  given  them  elsewhere,  and  the 
judgment  of  the  trustees,  if  exercised  in  good  faith,  shall  be 
final. 

14.  Any  real  estate,  or  any  interest  therein,  acquired  by 
the  trustees  after  the  delivery  of  this  instrument,  may  be 
conveyed  to  them  in  joint  tenancy  as  trustees  hereunder,  or 
may  be  conveyed  to  any  one  or  more  of  them  as  individuals, 
or  to  any  other  person  or  persons  for  their  benefit,  but  on 
or  before  the  first  day  of  April  in  the  year  one  thousand  nine 
hundred  and  twelve  the  trustees  shall  cause  to  be  conveyed 
to  them  in  joint  tenancy  as  trustees  hereunder  all  real  estate 
then  owned  by  them,  and  all  real  estate  thereafter  acquired 
shall  be  conveyed  to  them  in  joint  tenancy  as  trustees 
hereunder. 

15.  Any  notice  to  any  subscriber  hereto  or  to  any  share- 
holder of  any  meeting,  assessment,  dividend,  or  of  any  other 
matter  or  thing  which  may  be  required  under  the  provisions 
of  this  instrument,  or  which  may  be  deemed  by  the  trustees 
necessary  or  desirable,  or  which  may  be  ordered  in  any 
judicial  proceedings,  shall  be  deemed  sufficient  and  binding 
if  a  written  or  printed  copy  of  such  notice  shall  be  delivered 
personally,  or  mailed,  with  prepayment  of  postage,  to  such 
subscriber  or  shareholder,  or  to  his  attorney  designated  for 
the  purpose,  at  the  residence  given  on  his  subscription  or 
stated  in  his  certificate,  or  to  the  address  given  by  him  from 
time  to  time  to  said  trustees,  ten  days  prior  to  the  date  fixed 
for  such  meeting,  for  the  payment  of  such  assessment,  or 

347 


APPENDIX   OF   FORMS 

dividend,  or  for  the  happening  of  any  other  matter,  thing 
or  event,  of  which  such  notice  is  given. 

16.  The  trustees  may  from  time  to  time  in  their  discre- 
tion determine  which  of  their  receipts  and  expenditures  shall 
be  treated  as  capital  and  which  as  income,  and  in  making 
such  determination  they  shall  be  guided  by  their  judgment 
as  business  men,  ha\'ing  regard  to  the  character  and  develop- 
ment of  the  trust  property,  rather  than  bj'  any  strict  rule 
of  law,  and  their  determination  shall  be  final.  They  may 
divide  the  whole  or  any  part  of  the  net  income  of  the  prop- 
erty held  by  them  under  this  trust  among  the  shareholders 
annually  or  oftener  in  their  discretion,  and  in  any  fiscal  year 
in  which  the  net  income  of  the  trust  property  exceeds  two 
per  centum  of  the  par  value  of  the  average  number  of  shares 
outstanding  during  such  fiscal  year  they  shall  divide  at  least 
three-fourths  of  the  net  income.  The  decision  of  the  trustees 
as  to  what  constitutes  net  income  shall  be  final.  The  trus- 
tees may  set  aside  for  a  reserve  or  contmgent  fund  or  use  for 
the  improvement  of  the  trust  property  anj'  net  income  not 
di\4ded  as  above  provided. 

17.  Any  reserve  or  contingent  fund  and  any  money  await- 
ing investment,  or  temporarily  not  required  for  the  purposes 
of  the  trust,  may  be  put  at  interest  or  invested  and  rein- 
vested in  income-jaelding  securities  by  the  trustees  at  their 
discretion. 

18.  The  trustees  may  from  time  to  time  hire  suitable 
offices  for  the  transaction  of  the  business  of  the  trust,  ap- 
point such  oflacers  and  agents  as  they  maj-  think  best,  fix 
their  compensation  and  define  their  duties. 

The  compensation  of  the  trustees  with  respect  to  income 
shall  not  at  any  time  exceed  five  per  centum  of  the  income 
of  the  property  held  by  them. 

The  compensation  of  the  trustees  with  respect  to  capital 
shall  not  at  any  time  exceed  three  per  centum  of  anj^  sums 
expended  by  them  for  the  development  and  improvement, 
by  the  erection  of  buildings  or  otherwise,  of  the  trust  prop- 
erty, and  of  the  value  of  any  property  sold  by  them. 

19.  Any  trustee  under  this  instrument  may  resign  his 
trust  Ijy  a  written  instrument  signed  by  him  and  acknowl- 
edged in  the  manner  required  for  the  acknowledgment  of 
deeds;  and  such  instrument  shall  be  recorded  in  the  Registry 
of  Deeds  for  the  County  of  Suffolk  and  Commonwealth  of 

348 


PARK  SQUARE   REAL  ESTATE   TRUST 

Massachusetts.  When  any  vacancy  occurs  at  any  time  in 
the  office  of  trustee  all  property  in  the  trust  shall  vest  in  the 
remaining  trustees  or  trustee,  and  such  vacancy  shall  be 
filled  by  the  remaining  trustees  or  trustee  by  an  instrument 
in  writing  acknowledged  and  recorded  as  aforesaid,  and  the 
title  to  all  the  property  of  the  trust  shall  vest  in  any  new 
trustee  and  the  other  trustees,  and  such  new  trustee  shall 
have  the  same  powers  as  if  originally  named  herein. 

The  trustees  may,  from  time  to  time,  by  a  written  in- 
strument signed  by  them  and  acknowledged  in  the  manner 
required  for  the  acknowledgment  of  deeds  and  recorded  in 
the  Registry  of  Deeds  for  Suffolk  County,  authorize  any  two 
of  their  number  to  exercise  any  or  all  of  the  powers  here- 
under, and  such  authority  may  be  so  given  to  any  two  trus- 
tees hereunder  by  name,  or  to  any  two  of  the  persons  who 
may  at  any  time  be  lawfully  acting  as  trustees  hereunder, 
without  naming  them.  When  any  trustee  is  absent  from 
the  Commonwealth  of  Massachusetts,  or  incapable  by 
reason  of  illness  or  otherwise,  the  other  trustees  shall  have 
all  the  powers  hereunder;  and  any  trustee  may  by  power  of 
attorney  delegate  his  powers,  for  a  period  not  exceeding  six 
months  at  any  one  time,  to  any  other  trustee  or  trustees 
hereunder,  provided  that  in  no  case  shall  less  than  two 
trustees  actually  exercise  the  powers  hereunder  except  as 
aforesaid.  The  term  'Hhe  trustees"  wherever  used  herein 
shall  be  deemed  to  mean  those  who  are  or  may  be  trustees 
for  the  time  being.  No  trustee  shall  be  required  to  give  a 
bond. 

20.  No  trustee  hereunder  shall  be  responsible  except  for 
his  own  wilful  default.  The  trustees  shall  not  be  responsible 
for  the  act,  omission  or  default  of  any  agent,  if  they  have 
used  reasonable  care  in  the  selection  of  such  agent.  The 
trustees  may  pay  out  of  the  trust  fund  all  sums  of  money 
to  the  payment  of  which  they  or  either  of  them,  by  reason 
of  being  trustees  hereunder,  may  be  held  liable  or  subjected 
by  way  of  damages,  penalty  or  fine. 

21.  At  and  upon  the  expiration  of  twenty  years  after  the 
death  of  the  last  survivor  of  the  following-named  persons, 
Moses  Williams,  Amory  A.  Lawrence,  Alfred  Bowditch, 
Laurence  Minot,  being  the  original  trustees  hereunder, 
Moses  Williams,  3d,  and  Alexander  Whiteside  Williams, 
sons  of  Moses  Williams,  Jr.,  of  Needham,  William  Minot 

349 


APPENDIX  OF  FORMS 

and  Sedgwick  Minot,  sons  of  William  Minot,  late  of  Boston, 
deceased,  and  John  S.  Lawrence,  son  of  said  Amory  A. 
LawTence,  or  at  such  earlier  time,  not  earlier  than  the  second 
day  of  July  in  the  year  one  thousand  nine  hundred  and 
nineteen,  as  three-fourths  in  value  of  the  shareholders  may, 
by  an  instrument  in  writing,  signed  and  acknowledged  in 
the  manner  prescribed  for  the  acknowledgment  of  deeds, 
and  recorded  in  the  office  of  the  Registry  of  Deeds  for  said 
Suffolk  County,  appoint,  said  trustees  shall  terminate  this 
trust  by  selling,  as  soon  as  feasible  in  their  judgment,  all 
property  then  held  by  them  as  such,  and  dividing  the  pro- 
ceeds among  the  shareholders. 

Provided,  however,  that  upon  the  request  of  three- 
fourths  in  value  of  the  shareholders  in  writing,  signed,  ac- 
knowledged and  recorded  as  above  provided,  and  made  not 
earlier  than  the  second  day  of  July  in  the  year  one  thousand 
nine  hundred  and  nineteen,  said  trustees  may,  if  it  seems 
to  them  judicious  so  to  do,  convey  the  trust  property  to 
new  or  other  trustees,  or  to  a  corporation,  according  to  the 
terms  of  such  request,  and  in  the  manner  stated  therein, 
being  first  duly  indeimiified  for  any  outstanding  obligation; 
and  said  trustees,  upon  filing  in  the  Registry  of  Deeds  for 
said  Suffolk  County  a  certificate  that  they  have  complied 
wdth  such  request,  shall  be  under  no  further  obligation. 

Provided,  however,  and  it  is  especially  understood  and 
agreed  that  nothing  in  this  clause  contained  shall  be  con- 
strued as  making  it  obligatory  upon  the  trustees  to  comply 
with  such  request  to  convey. 

22.  Meetings  of  the  shareholders  may  be  called  by  any 
one  of  the  trustees  and  shall  be  called  upon  the  written  re- 
quest of  five  or  more  shareholders.  Additional  powers  may 
be  created  in  the  trustees  at  any  meeting  of  the  shareholders 
by  vote  or  resolution  of  the  holders  of  at  least  two-thirds 
of  the  shares  then  outstanding;  provided  that  notice  of  the 
proposed  addition  to  such  powers  shall  have  been  given  in 
the  call  for  the  meeting  and  that  the  same  is  not  inconsistent 
with  the  acquired  rights  of  third  parties.  All  recitals  of 
fact  in  any  instrument  in  writing,  signed  and  sealed  by  the 
trustees  and  acknowledged  by  one  or  more  of  them,  and 
recordefl  in  tlu;  Registry  of  Deeds  for  the  County  of  Suffolk, 
shall  b(!  conclusive  evidence  of  all  facts  so  recited  in  favor 
of  all  persons  dealing  with  the  trustees. 

350 


PARK  SQUARE   REAL  ESTATE   TRUST 

23,  At  all  meetings  of  shareholders  each  share  shall  be  en- 
titled to  one  vote,  and  absent  shareholders  may  vote  by 
proxy  authorized  by  a  writing  dated  and  executed  within 
six  months  previous  to  the  meeting  at  which  it  is  used. 

24.  The  trustees  or  any  of  them,  in  their  individual  capac- 
ity, or  in  any  other  fiduciary  capacity,  acting  alone  or  in 
conjunction  with  others,  may  purchase  and  hold  any  shares 
issued  hereunder  and  also  may  subscribe  for  and  purchase 
on  the  terms  offered  to  third  persons  generally,  any  notes 
or  bonds  convertible  or  otherwise  authorized  or  issued  by 
the  trustees,  and  may  purchase  at  public  auction  any  real 
estate  or  any  interest  therein  offered  for  sale  by  the  trustees, 
and  may  purchase  at  private  sale  on  any  terms  approved 
by  the  vote  of  three-fourths  in  value  of  the  registered  share- 
holders passed  at  any  meeting  called  for  that  purpose,  such 
terms  being  stated  in  the  call  for  such  meeting,  any  real 
estate  or  any  interest  therein  offered  for  sale  by  the  trustees. 

In  Witness  Whereof  we  have  hereunto  set  our  hands  and 
seals  this  fifteenth  day  of  September  in  the  year  one  thou- 
sand nine  hundred  and  nine. 

Moses  Williams  (Seal) 

Amory  a,  Lawrence  (Seal) 

Alfred  Bowditch  (Seal) 

Laurence  Minot  (Seal) 

Commonwealth  op  Massachusetts  "1 

County  of  Suffolk  j  '    '     Boston,  October  21,  1909. 

Then  personally  appeared  the  above-named  Laurence 
Minot,  and  acknowledged  the  foregoing  instrument  to  be 
his  free  act  and  deed,  Before  me, 

Charles  S.  Rackemann, 

Justice  of  the  Peace. 
Boston,  December  24,  1909. 
at  3  o'clock  and  39  minutes  p.m. 
Received  and  Entered  with  Sufifolk 
Deeds,  Libro  3418,  Page  504. 

Attest : 

William  T.  A.  Fitzgerald, 
Registrar. 


351 


D 

BOSTON  PERSONAL  PROPERTY  TRUST 

(Williams  v.  Milton,  215  Mass.  1) 

This  Declaration  of  Trust,  made  this  tenth  day  of 
Januar}^,  in  the  year  eighteen  hundred  and  ninety-three, 
by  John  Quiney  Adams  of  Quincy,  Moses  Wilhams  of  Brook- 
line,  WiUiam  Minot,  Jr.,  and  Abbott  Lawrence  Lowell,  both 
of  Boston,  and  Robert  Sedgwick  Minot  of  Manchester,  all 
in  the  Commonwealth  of  Massachusetts  (hereinafter  called 
the  Trustees),  witnesseth: 

Designation 

First.  That  this  trust  shall  be  designated  the  "Boston 
Personal  Property  Trust." 

I.    TRUSTEES'   DUTIES,   POWERS  AND   LIABILITIES 

Declaration,  not  a  Partnership,  Cestuis  not  Liable 

Second.  That  the  said  Trustee  shall  hold  all  the  funds 
and  property  (hereinafter  called  the  trust  fund),  now  or 
hereafter  held  by  or  paid  to,  or  transferred  or  conveyed  to 
them  or  their  successors  as  Trustees  hereunder  in  trust  for 
the  purposes,  with  the  powers  and  subject  to  the  limitations 
hereinafter  declared,  for  the  benefit  of  the  cestuis  que  trustent, 
and  it  is  hereby  expressly  declared  that  a  trust,  and  not  a 
partnership,  is  hereby  created;  that  neither  the  trustees  nor 
the  cestuis  que  trustent  shall  ever  be  personally  liable  here- 
under as  partners  or  otherwise,  but  that  for  all  debts  the 
trustees  shall  be  liable  as  such  to  the  extent  of  the  trust  fund 
only.  In  all  contracts  or  instruments  creating  liability,  it 
shall  be  expr(!ssly  stipulated  that  the  cestuis  que  trustent 
shall  not  be  liable. 

352 


BOSTON   PERSONAL   PROPERTY   TRUST 

Payments 

Third.  In  case  any  person  proposes  to  pay  by  instalments, 
or  at  a  future  date,  sums  of  money  for  interests  in  the  trust 
fund,  the  trustees  shall  have  full  power  and  discretion  to 
call  such  payments  upon  such  terms  and  conditions  as  they 
see  fit,  and  to  receive  the  same  either  wholly  or  partly  in 
cash,  or  in  any  property  in  which  they  are  authorized  to 
invest  said  fund. 

Power   of   Investment,    Personal   Property,    Ground 

Rents 

Fourth,  (a)  The  Trustees  shall  have  as  full  power  and 
discretion,  as  if  absolute  owners,  to  invest  and  reinvest  the 
trust  fund  (including  any  surplus  and  also  income)  in  per- 
sonal property,  including  bonds  and  notes  or  obligations 
secured  upon  real  estate,  and  the  decision  of  the  Trustees  as 
to  what  is  personal  property  shall  be  final.  They  shall  have 
the  like  power  of  investment  in  the  purchase  and  improve- 
ment of  real  estate  in  the  cities  of  the  United  States  of 
America,  for  the  purpose  of  leasing  the  same  upon  long  terms, 
or  ground  rents  so-called;  and  all  real  estate  so  purchased 
shall  be  conveyed  to  them  in  joint  tenancy  as  Trustees 
hereunder. 

Power  of  Sale 

(6)  The  Trustees  shall  have  full  power  and  discretion  to 
sell,  transfer,  and  convey  from  time  to  time,  at  public  or 
private  sale,  any  part  or  all  of  said  trust  fund,  upon  such 
terms  and  conditions  as  they  see  fit,  and  to  invest  the  pro- 
ceeds in  the  same  manner,  and  upon  the  same  trusts  as  the 
original  fund. 

Powers  as  to  Real  Estate 

(c)  The  Trustees  shall  have  absolute  control  over  and 
power  to  dispose  of  all  real  estate  held  by  them  at  any  time 
under  this  Trust,  as  if  they  were  the  absolute  owners  thereof, 
including  the  power  to  sell  and  convey,  as  above  set  forth,  to 
improve,  to  lease  or  hire  for  improvement  or  otherwise,  for 
a  term  beyond  the  possible  termination  of  this  trust,  or  for 
any  less  term,  either  with  or  without  option  of  purchase,  to 
let,  to  exchange,  to  release,  and  to  partition. 

353 


APPENDIX   OF   FORMS 

Power  to  Borrow  and  Mortgage 

(d)  The  Trustees  may  borrow  money,  for  such  time  and 
upon  such  terms  as  they  see  fit,  on  mortgage  of  any  real 
estate  held  by  them  hereunder,  and  may  give  mortgages 
therefor,  either  with  or  without  power  of  sale,  but  never  for 
more  than  sixty  per  cent,  of  the  value,  in  their  judgment, 
of  the  property  so  mortgaged. 

Power  to  Borrow  and  Pledge 

(e)  The  Trustees  shall  also  have  power  at  any  time  to 
borrow  money,  and  to  pledge,  as  collateral  security  for  such 
loan,  any  personal  property  belonging  to  the  trust  fund, 
provided,  however,  that  no  loan  shall  be  contracted  for, 
so  that  the  aggregate  amount  of  such  loans  outstanding  shall 
at  such  time  exceed,  in  the  judgment  of  the  Trustees,  twenty- 
five  per  cent,  of  the  total  amount  of  the  personal  property 
of  the  trust  fund. 

Execution  of  Instruments 

(/)  The  execution  of  all  contracts,  of  all  conveyances  and 
transfers,  and  of  all  other  instruments  relating  to  the  trust 
fund  or  any  part  thereof,  by  any  three  Trustees,  shall  al- 
ways be  sufficient.  The  acting  Trustee  or  Actuary  or  Treas- 
urer shall  have  full  power  to  cancel  and  .discharge  mort- 
gages, by  deed  or  otherwise,  on  the  payment  or  satisfaction 
thereof. 

Purchasers,  etc..  Not  Liable 

(g)  No  purchaser,  lender,  corporation,  association  or 
officer  or  transfer  agent  thereof,  dealing  with  the  Trustees, 
shall  be  bound  to  make  any  inquiry  concerning  the  validity 
of  any  sale,  pledge,  mortgage,  loan,  or  purchase  purporting 
to  be  made  by  the  Trustees,  or  be  liable  for  the  application 
of  money  paid  or  loaned. 

Records,  Depositary 

Fifth.  The  Trustees  shall  constitute  as  their  Depositary 
such  trust  company  in  the  city  of  Boston  as  they  shall  from 
tim(;  to  time  select,  and  iiereby  declare  that  tiiey  have  se- 
lected for  such  Depositary  the  State  Street  Safe  Deposit 
&  Trust  Company.     Such  Depositary  shall  have  the   cus- 

3.54 


BOSTON   PERSONAL   PROPERTY  TRUST 

tody  of  this  declaration  of  trust,  of  any  and  all  instruments 
altering  or  adding  to  the  same,  or  terminating  the  trust,  or 
containing  the  resignation  of  one  or  more  Trustees,  or  ap- 
pointing one  or  more  Trustees  to  fill  vacancies,  or  ap- 
pointing a  Trustee  attorney  for  a  co-Trustee,  or  otherwise 
affecting  this  declaration  of  trust,  or  the  duties,  powers,  or 
liabilities  of  the  Trustees.  Such  Depositary  shall  be  bound 
to  deliver  on  demand  to  any  new  Depositary  selected  by  the 
Trustees,  all  such  documents  and  records,  and  also  to  record, 
at  the  request  of  the  Trustees,  any  such  document  in  any 
place  of  public  record  selected  by  them,  whereupon  the  duty 
of  such  Depositary  as  to  such  recorded  document,  and  its 
liability  therefor  hereunder,  shall  cease,  and  it  shall  deliver 
to  the  Trustees  all  papers  relating  to  the  same.  Copies  of 
all  documents  and  records  in  the  custody  of  such  Depositary, 
duly  certified,  and  certificates  as  to  who  are  the  Trustees,  or 
cestuis  que  trustent,  or  the  like,  duly  signed  by  the  President, 
Treasurer,  or  Actuary  of  such  Depositary,  shall  be  conclu- 
sive upon  all  questions  as  to  title  or  affecting  the  rights  of 
third  persons,  and  in  general  shall  have  all  the  effect  of  their 
originals. 

Management  and  Compensation 

Sixth.  The  Trustees  may  from  time  to  time  hire  suitable 
offices  for  the  transaction  of  the  business  of  the  Trust,  ap- 
point, remove,  or  reappoint  such  officers  or  agents  (including 
a  Depositary,  and  also  agents  to  procure  proposals  for  pay- 
ments for  interests  herein)  as  they  may  think  best,  define 
their  duties,  and  fix  their  compensation.  The  compensation 
of  the  Trustees  shall  not  at  any  time  exceed  five  per  cent, 
of  the  gross  income  of  the  Trust  Fund,  and  one  per  cent, 
of  the  amount  distributed  or  conveyed  upon  final  distribution 
or  conveyance. 

Dividends,  Surplus 

Seventh.  The  Trustees  shall  declare  dividends  from  the 
net  income  of  the  Trust  Fund  among  the  cestuis  que  trustent 
quarterly,  or  oftener,  if  convenient  to  the  Trustees,  and  their 
decision  as  to  amount  of  dividends,  and  as  to  using  therefor 
any  portion  of  the  surplus  fund,  shall  be  final.  They  may 
set  aside  from  time  to  time  such  portion  of  the  net  income 
as  shall  not  be  required  for  dividends  for  a  surplus  fund. 

355 


APPENDIX   OF   FORMS 

Power  to  Decide  Between  Income  and  Capital 

Eighth.  The  Trustees  may  charge  all  brokers'  and  agents' 
commissions  to  Income  or  Capital,  as  they  see  fit.  Thej' 
shall  have  the  right  to  treat  as  income  such  portion  of  the 
price  of  stock  bought  or  sold  between  di\'idend  days  as 
fairly  represents  accrued  dividends  reckoned  by  way  of 
interest,  but  never  at  a  higher  rate  than  six  per  cent,  per 
annum  on  the  price  paid  or  received.  In  general  their  de- 
cision as  to  what  constitutes  Capital  or  Income,  or  shall  be 
credited  or  debited  to  Capital  or  Income,  shall  be  final. 

Annual  Account 

Ninth.  The  Trustees  shall  render  an  account  annually 
or  oftener,  if  convenient  to  them,  and  shall,  upon  request, 
deliver  or  mail  a  copy  to  each  cestui  que  trust. 

Resignation.  Vacancy,  New   Appointment,  TEirpoiLVRY 
Absence,  Power  of  ATTORNTiT 

Tenth.  Any  Trustee  may  resign  his  trust  by  a  written 
instrument  signed  and  sealed  by  him,  and  acknowledged  in 
the  maimer  prescribed  for  the  acknowledgment  of  deeds, 
and  such  instrument  may  be  recorded  in  the  Registry 
of  Deeds  for  the  County  of  Suffolk,  or  deposited  with 
such  Depositary  as  the  Trustees  shall  from  time  to  time 
select. 

Any  vacancy  occurring  from  an}^  cause  at  any  time  in  the 
number  of  said  Trustees  shall  be  filled  by  the  remaining 
Trustees.  Until  such  vacancy'  is  filled,  or  while  any  Trustee 
is  absent  from  the  Commonwealth  of  ^Massachusetts,  or 
phj'sically  or  mentally  mcapable,  by  reason  of  disease  or 
otherwise,  the  other  Trustees  shall  have  all  the  powers  here- 
under, and  the  certificate  of  the  other  Trustees  of  such  va- 
cancy, absence,  or  incapacity'  shall  be  conclusive.  In  case 
of  such  vacancy  or  of  appointment  of  a  new  Trustee  or 
Trustees,  the  Trust  Fund  shaU  unmediately  vest  in  the  re- 
maining Trustees  or  in  the  new  Trustee  or  Trustees,  jointly 
with  the  remaining  Trustees,  as  the  case  may  be.  And  any 
Trustee  may,  by  power  of  attorney,  delegate  liis  powers, 
for  a  period  not  exceeding  sLx  months  at  any  one  time,  to 
any  other  Trustee  or  Trustees  hereunder,  provided  that  in 
no  ease  shall  less  than  three  Trustees  personally  exercise 

356 


BOSTON   PERSONAL  PROPERTY  TRUST 

the  other  powers  hereunder  (except  in  case  of  discharge  of 
mortgages,  as  hereinbefore  provided). 

The  term  "Trustees"  used  in  this  agreement  shall  be 
deemed  to  mean  those  who  are  or  may  be  Trustees  for  the 
time  being. 

Trustees'  Liability,  No  Bond  Required 

Eleventh.  Each  Trustee  shall  be  responsible  only  for  his 
own  wilful  and  corrupt  breach  of  trust,  and  not  for  any 
honest  error  of  judgment,  and  not  one  for  another.  No 
Trustee  shall  be  required  to  give  a  bond. 

II.    RIGHTS  AND  LIABILITIES  OF  CESTUIS  QUE  TRUSTENT, 

NOTICES 

Twelfth.  Notices  delivered  personally,  or  mailed  with 
prepayment  of  postage  seven  days  beforehand  to  any 
cestui  que  trust,  or  to  his  attorney  duly  designated  for  the 
purpose,  at  the  residence  stated  by  him  or  in  the  certificate, 
or  to  the  address  given  by  him  or  them  from  time  to  time  to 
the  Trustees,  shall  be  binding. 

Forfeiture  of  Payments 

Thirteenth.  In  case  any  cestui  que  trust  neglects  to  pay 
any  instalment  within  the  time  specified  in  the  call  therefor, 
the  Trustees  may,  if  they  see  fit,  declare  any  amount  of  his 
previous  payment  or  payments  to  be  forfeited. 

Certificates,   Convertible   Scrip,   Lost  Certificates 

Fourteenth.  The  Trustees  shall  issue  a  certificate,  in 
such  form  as  they  shall  deem  best,  to  each  person  who  shall 
pay  them  the  sum  of  one  thousand  dollars  or  multiple  thereof, 
for  an  interest  in  the  Trust  Fund.  But  no  certificate  shall 
be  issued  for  any  less  sum  than  one  thousand  dollars,  at  par 
value.  The  Trustees  may  also  from  time  to  time,  if  they  see 
fit,  issue  scrip  of  the  par  value  of  one  hundred  dollars  or  mul- 
tiples thereof,  convertible  into  certificates  in  sums  of  one  thou- 
sand dollars  or  multiples  thereof,  and  bearing  interest,  and  on 
such  other  terms  and  conditions  as  they  shall  deem  best. 

In  case  of  the  loss  or  destruction  of  a  certificate  or  scrip, 
the  Trustees  may  issue  a  duplicate  thereof,  on  such  terms 
as  they  deem  proper. 

357 


APPENDIX  OF   FORMS 

Transfer  of  Certificates 

Fifteenth.  The  interests  represented  by  the  certificates 
may  be  transferred  on  the  books  of  the  Trustees  by  the 
person  named  therein,  or  his  legal  representative,  upon  the 
surrender  of  the  certificate,  and  a  new  certificate  shall  be 
issued  to  the  transferee,  who  shall  thereupon  become  a 
cestui  que  trust.  But  no  such  interest  shall  be  sold  until 
the  holder  thereof  (including  assignees  in  insolvency  or 
bankruptcy,  or  for  benefit  of  creditors,  and  holders  by 
process  of  law  or  otherwise,  except  as  hereinafter  stated) 
shall  have  first  in  writing  offered  it  for  sale  to  the  Trustees, 
who  shall,  as  such  Trustees,  have  the  option  for  ten  days 
after  the  receipt  of  such  offer  of  buying  the  same  at  not 
more  than  the  last  preceding  appraisal  made  by  them,  such 
appraisal  to  be  made  annually  or  oftener  as  they  shall  deem 
best.  Interests  so  purchased  by  the  Trustees  may  be  held 
as  part  of  the  Trust  Fund,  or  sold  by  them  at  their  dis- 
cretion. 

Devises  by  will,  distribution  of  the  assets  of  deceased  per- 
sons according  to  law,  and  distribution  of  trust  funds  among 
those  entitled  thereto  upon  the  termination  of  trusts,  shall 
not  be  deemed  sales  for  the  purposes  hereof. 

No  Assessment  or  Personal  Liability 

Sixteenth.  No  assessment  shall  ever  be  made  upon  the 
cestuis  que  trustent,  nor  shall  they  ever  be  personally  liable 
in  any  event,  or  have  any  rights  hereunder  except  as  herein 
defined. 

Books  Open  to  Inspection 

Seventeenth.  The  books  of  the  Trustees  shall  always  be 
open  to  the  inspection  of  the  cestuis  que  trustent. 

Increase  of  Capital,  Rights 

Eighteenth.  The  Trustees  may  from  time  to  time,  at 
their  discretion,  invite  and  receive  payments  for  interests 
in  the  Trust  Fund  in  cash  or  in  property,  as  hereinbefore 
provided,  for  the  purpose  of  increasing  the  capital  of  the 
Trust  Fund,  giving  preferonce,  if  they  see  fit,  upon  such  terms 
and  c(jn(litions  as  they  shall  deem  best,  to  existing  cestuis 
que  trustent.  All  payments  shall  be  subject  to  the  terms  of 
this  Declaration  of  Trust. 

358 


BOSTON  PERSONAL  PROPERTY  TRUST 

III.    DURATION  AND  TERMINATION  OF  TRUST 

Nineteenth.  At  and  upon  the  expiration  of  twenty  years 
after  the  death  of  the  last  survivor  of  the  following-named 
persons :  — 

Walter  Abbott,  son  of  Jere  Abbott  of  Boston; 

George  C,  Adams,  son  of  John  Quincy  Adams  of  Quincy; 

Oliver  Ames,  son  of  Frederick  L.  Ames  of  Easton; 

F.  Reginald  Bangs,  son  of  Edward  Bangs  of  Wareham; 

Boylston  A.  Beal,  son  of  James  H.  Beal  of  Boston; 

Robert  P.  Blake,  son  of  S.  Parkman  Blake  of  Boston; 

Causten  Browne,  Jr.,  son  of  Causten  Browne  of  Boston; 

Edmund  D.  Codman,  son  of  Robert  Codman  of  Boston; 

David  H.  Coolidge,  Jr.,  son  of  David  H.  Coolidge  of 
Boston; 

Philip  Dexter,  son  of  William  S.  Dexter  of  Boston; 

John  M.  Howells,  son  of  William  D.  Howells  of  Boston; 

Laurence  Minot,  son  of  William  Minot  of  Boston; 

William  Minot,  3d,  son  of  William  Minot,  Jr.,  of  Boston; 

James  Otis  Porter,  son  of  Alexander  S.  Porter  of  Beverly; 

Abbott  Lawrence  Rotch,  son  of  Benjamin  S.  Rotch,  late 
of  Milton; 

James  J.  Storrow,  Jr.,  son  of  James  J.  Storrow  of  Boston; 

Samuel  Wells,  Jr.,  son  of  Samuel  Wells  of  Boston; 

George  Putnam,  son  of  William  L.  Putnam  of  Boston; 

Gladys  Williams,  daughter  of  Moses  Williams  of  Brook- 
line; 

Robert  S.  Minot,  Jr.,  son  of  Robert  S.  Minot  of  Manches- 
ter; 

,or  at  such  earlier  time  as  hereinafter  provided,  the  Trustees 
shall  terminate  this  trust  by  dividing  the  Trust  Fund,  or 
the  proceeds  thereof,  among  the  cestuis  que  trustent,  being 
first  duly  indemnified  for  any  outstanding  obligation  or 
liability,  and  shall  thereupon  be  forthwith  discharged. 

Alteration   of   Trust,    Termination   of   Trust,   Con- 
veyance OF  Trust  Fund 

Twentieth.  The  Trustees  may,  with  the  consent  of  the 
three-fourths  in  interest  of  the  cestuis  que  trustent,  alter  or 
add  to  this  declaration,  or  terminate  this  trust,  and  if  it 
seems  to  them  judicious  so  to  do,  they  may,  with  like  consent, 

359 


APPENDIX  OF   FORMS 

convey  the  Trust  Fund  to  new  or  other  Trustees,  or  to  a 
corporation,  being  first  duly  indemnified  for  any  outstanding 
obligation  or  liability.  The  instrument  setting  forth  such 
alteration,  addition,  termination,  or  conveyance  shall  be 
signed  by  at  least  three  of  the  Trustees  and  recorded  in 
said  Registry  of  Deeds,  or  deposited  with  such  Depositary 
as  the  Trustees  shall  select.  Such  instruments  shall  be  con- 
clusive of  the  existence  of  all  facts  and  of  compliance  with 
all  prerequisites  necessary  to  the  validity  of  such  alteration, 
addition,  termination,  or  conveyance,  whether  stated  in 
such  instrument  or  not,  upon  all  questions  as  to  title  or  affect- 
ing the  rights  of  third  persons. 

Provided,  however,  and  it  is  especially  declared,  that 
the  Trustees  shall  be  under  no  obligation  to  terminate  this 
Trust  or  convey  the  Trust  Fund,  except  as  hereinbefore  pro- 
vided. 

In  Testimonium 

Twenty-first.  In  Witness  Whereof,  the  said  Trustees 
have  hereunto  set  their  hands  and  seals  the  day  and  year 
above  written  in  duplicate. 

Signed  and  sealed  in  presence  of 
Signed  Charles  H.  Shriver 

John  Quincy  Adams  (Seal) 

Moses  Williams  (Seal) 

Signed  ]  William  Minot,  Junior  (Seal) 
A.  Lawrence  Lowell  (Seal) 
Robert  S.  Minot  (Seal) 

Commonwealth  of  Massachusetts! 

Suffolk  J      "   Boston,  January  14,  1895. 

Then  personally  appeared  the  above  named  John  Quincy 
Adams,  Moses  Williams,  William  Minot,  Junior,  A.  Law- 
rence Lowell,  Robert  S.  Minot,  and  acknowledged  the  fore- 
going instrument  to  be  their  free  act  and  deed. 
Before  me, 

Signed    Charles  H.  Shriver, 

Notary  Public. 

A  true  copy  of  the  original  on  file  with  this  Company. 

State  Street  Trust  Co., 

A.  L.  Carr,  Treasurer. 
300 


BOSTON  PERSONAL  PROPERTY  TRUST 


BOSTON   PERSONAL  PROPERTY  TRUST 

Resignation  of  Charles  C.  Jackson  as  Trustee 

Boston,  Mass.,  March  31, 1906. 

To  Moses  Williams,  A.  Lawrence  Lowell,  Robert  S.  Minot,  and  Charles 
F.  Adams,  2d,  my  Co-Trustees  under  a  declaration  of  trust  dated 
January  10,  1893. 

Dear  Sirs,  —  I  hereby  resign  my  Trusteeship  under  said 
Declaration  of  Trust,  said  resignation  to  take  effect  at  the 
close  of  business  this  day. 

Very  truly  yours, 

Charles  C.  Jackson. 

Commonwealth  of  Massachusetts  \ 

Suffolk  /  ^^'  March  31,  1906. 

Then  personally  appeared  the  above-named  Charles  C. 
Jackson   and   acknowledged   the    foregoing   instrument   to 
be  his  free  act  and  deed. 
Before  me, 

Edmund  W.  Young, 

Notary  Public. 
(Notarial  Seal) 

A  true  copy  of  the  original  instrument  on  file  with  this 
Company. 

State  Street  Trust  Co., 
By  E.  W.  FooTE,  Asst.  Treasurer. 


361 


APPENDIX   OF   FORMS 

BOSTON   PERSONAL  PROPERTY  TRUST 

Appointment  of  Henry  B.  Cabot  as  Trustee 

We,  Moses  Williams,  A.  Lawrence  Lowell,  Robert  S. 
Minot,  and  Charles  F.  Adams,  2d,  sole  remaining  Trustees 
under  a  Declaration  of  Trust  dated  January  10,  1893,  de- 
posited with  the  State  Street  Trust  Company  of  Boston, 
acting  under  and  by  virtue  of  the  powers  to  us  given  therein 
(see  Clause  10),  do  hereby  appoint  Henry  B.  Cabot  of  Brook- 
line  in  the  County  of  Norfolk  and  Commonwealth  of  Massa- 
chusetts to  be  our  Co-Trustee  under  said  Declaration  of 
Trust  in  the  place  and  stead  of  Charles  C.  Jackson,  resigned 
this  day. 

Witness  our  hands  and  seals  at  Boston,  March  31,  1906. 


Signed  and  Moses  Williams, 

sealed   in  A.  Lawrence  Lowell, 

presence  Charles  F.  Adams,  2d, 

of  Robert  S.  Minot, 

Edmund  W.  Young — to  all 


Sole  (Seal) 

Remaining  (Seal) 

Trustees  (Seal) 

as  Aforesaid  (Seal) 


Commonwealth  of  Massachusetts  1 

Suffolk  j  ^^'  March  31,  1906. 

Then  personally  appeared  the  above-named  Moses  Wil- 
liams, A.  Lawrence  Lowell,  Robert  S.  Minot,  arid  Charles  F. 
Adams,  2d,  and  acknowledged  the  foregoing  instrument  to 
be  their  free  act  and  deed. 
Before  me, 

Edmund  W.  Young, 

Notary  Public. 
(Notarial  Seal) 

A  true  copy  of  the  original  instrument  on  file  with  this 
Company. 

State  Street  Trust  Co., 
By  E.  W.  FooTE,  Asst.  Treasurer. 


362 


E 
BUENA  VISTA   FRUIT  COMPANY 

(Frost  V.  Thompson,  219  Mass.  360) 

By-Laws  of  the  Buena  Vista  Fruit  Company 

Article  I 
Executive  Board 
The  Trustees  shall  appoint  an  Executive  Board  of  three 
who  shall  have  the  general  direction,  control  and  manage- 
ment of  the  property  and  business  of  the  Company.  They 
shall  have  ample  power  to  purchase,  lease,  pledge  and  sell  all 
such  personal  and  real  property,  and  to  make  all  such  con- 
tracts and  agreements  on  behalf  of  the  Company  as  they  may 
deem  needful  or  convenient  for  the  successful  prosecution  of 
its  business  and  operations.  If  in  their  opinion  it  shall  be  nec- 
essary for  the  Company  to  borrow  or  raise  monies  in  payment 
for  any  real  or  personal  property,  or  for  any  value  received, 
or  for  any  purpose  of  the  Company  as  set  forth  in  the  Decla- 
ration of  Trust,  they  may  authorize  the  issue  of  notes  or  other 
obligations  by  the  Company  for  monies  so  borrowed.  They 
shall  generally  do  such  lawful  acts,  and  adopt  all  such  lawful 
measures  consistent  with  the  Declaration  of  Trust  and  the 
by-laws  of  the  Company  as  they  shall  deem  best  calculated 
to  promote  to  the  fullest  extent  the  interest  of  the  stockhold- 
ers and  investors.  The  members  of  said  Executive  Board 
shall  be  designated  as  President,  Treasurer  and  Secretary. 

Article  II 

President 
It  shall  be  the  duty  of  the  president  to  preside  at  all  meet- 
ings of  the  Trustees  and  shareholders;  to  sign  all  contracts 
in  the  name  of  the  Company  subject  to  the  approval  of  the 
Executive  Board  of  Trustees;  and  to  perform  any  other  acts 
incident  to  his  office  under  the  direction  of  the  Trustees. 

Article  III 
Treasurer 
The  treasurer  shall  have  the  custody  of  all  monies,  con- 
tracts, documents  and  other  papers  belonging  to  the  Com- 

363 


APPENDIX  OF  FORMS 

pany,  and  of  its  common  seal,  and  shall  safely  keep  the  same, 
and  shall  collect  all  monies  from  time  to  time  due  and  owing 
to  the  Company,  and  disburse  the  same  pursuant  to  the 
contracts  and  obligations  of  the  Company,  or  the  order  of 
its  Trustees.  He  shall  make,  sign,  endorse,  and  accept  for 
and  in  the  name  and  behalf  of  the  Company,  promissory 
notes,  drafts  and  checks  in  the  regular  course  of  its  business. 
He  shall  execute  and  deliver  in  behalf  of  the  Company  all 
such  instruments  under  its  common  seal  as  he  may  be  or- 
dered by  the  Trustees,  and  shall  affix  the  common  seal  to  all 
certificates  of  stock  issued  by  the  Company,  and  shall  per- 
form such  other  duties  as  the  Trustees  may  from  time  to 
time  require. 

The  treasurer  shall  give  a  bond  to  the  Company  for  the 
faithful  performance  of  his  duties,  if  required  by  the  Trus- 
tees, in  such  sum  and  with  such  sureties  as  they  may  re- 
quire. He  shall  be  subject  to  such  conditions  and  restric- 
tions as  may  be  made  by  the  Trustees. 

Article  IV 

Secretary 

The  secretary  shall  attend  the  meetings  of  the  Trustees 
and  shareholders  and  shall  keep  a  record  of  the  proceedings 
of  the  same  at  their  respective  meetings.  He  shall  have  the 
custody  of  all  the  books  of  the  Company,  and  shall  have  the 
power,  in  the  absence  of  the  treasurer  to  sign  receipts,  checks, 
notes  or  other  documents  necessary  in  the  conducting  of  the 
business  affairs  of  the  Company.  He  shall  perform  such  other 
duties  as  the  Trustees  shall  from  time  to  time  prescribe. 

Article  V 
General  Counsel 

The  Board  of  Trustees  shall  appoint  a  general  counsel 
who  shall  be  an  attorney  and  counsellor-at-law.  He  alone 
shall  act  as  the  legal  advisor  of  the  Company,  and  any 
action  of  the  Board  of  Trustees,  Executive  Board,  or  any 
other  board  or  committee  thereof,  shall  be  subject  to  his 
approval,  and  liis  decision  on  all  matters  shall  be  final.  He 
shall  draft  all  bonds,  deeds,  obligations,  contracts,  leases 
and  oth(!r  legal  documents  of  whatever  nature  that  may  be 
r(;quir(!d  by  the  Comj)any.  He  shall  be  present  at  all  meet- 
ings of  the  Trustees. 

364 


BUENA   VISTA   FRUIT   COMPANY 

Article  VI 

Finance  Board 

The  Trustees  shall  appoint  a  finance  board  of  two  who 

shall  meet  at  least  once  each  month  and  approve  all  bills 

due  and  payable  and  when  required  examine  all  books  of 

account  and  vouchers  of  the  Company  and  make  report. 

Article  VII 

Land  Board 

The  Trustees  shall  appoint  a  land  board  of  two  who  shall 

have  general  supervision  of  the  land  location,  streets,  roads, 

buildings  and  other  work  on  the  plantation  at  Omaja,  Cuba, 

as  directed  by  the  Executive  Board  of  Trustees. 

Article  VIII 

Meetings  of  the  Trustees 
The  meetings  of  the  Board  of  Trustees  shall  be  held  as 
often  as  the  needs  of  the  Company  may  in  their  opinion  re- 
quire, and  may  be  called  by  the  president  or  by  the  treas- 
urer or  by  any  trustee,  and  the  secretary  shall  notify  the 
trustees  of  such  meeting,  when  requested,  in  writing.  Said 
notice  to  be  mailed  twenty-four  hours  before  the  said  meet- 
ing. Notice  of  any  meeting  may  be  dispensed  with  by  each 
Trustee  by  a  writing  filed  with  the  records  of  the  meeting 
waiving  such  notice. 

Article  IX 

Annual  Meeting 
The  annual  meeting  of  the  Trustees  shall  be  held  on  the 
first  Tuesday  of  October  in  each  year  at  the  office  of  the 
Company  in  Boston,  Mass.     The  fiscal  year  shall  end  with 
September  1st  of  each  year. 

Article  X 

Offices 
The  principal  offices  of  the  Company  shall  be  in  Boston, 
Massachusetts,  with  a  branch  office  at  Omaja,  Cuba. 

Article  XI 
Seal 
The  seal  of  the  Company  shall  be  circular  in  form  and 
bear  on  its  face  the  name  of  the  Company  and  shall  be 
capable  of  being  impressed  on  paper. 

365 


APPENDIX   OF   FORMS 

Article  XII 

Contracts  for  Sale  of  Land 

All  contracts  for  the  sale  of  land  made  in  the  name  of 
the  Company  shall  be  signed  by  the  president  and  approved 
by  the  Executive  Board  of  Trustees,  and  by  the  general 
coimsel  of  the  Company,  and  shall  bear  the  imprint  of  the 
seal  of  the  Company. 

Article  XIII 

Contracts  Registered 

All  contracts  made  in  the  name  of  the  Company  shall  be 
registered  by  the  secretary  in  a  book  kept  for  said  purpose, 
and  shall  contain  the  names  and  addresses  of  the  parties 
making  said  contracts. 

Article  XIV 

Inspector 

The  contract  holders  in  the  Company  shall  annually  ap- 
point two  of  their  number  to  go  to  Cuba  and  inspect  the 
work  and  condition  of  the  plantation  of  the  Company,  and 
shall  make  a  report  thereof.  The  entire  expenses  of  said 
inspectors  to  be  borne  by  the  Company. 

Article  XV 

Amendments 

These  by-laws  may  be  altered,  amended  or  repealed  by 
vote  of  the  Trustees  or  shareholders  holding  a  majority  of 
the  shares  issued  by  the  Company,  represented  in  person  or 
by  proxy,  at  any  armual  or  special  meeting  of  the  Trustees 
or  shareholders,  provided  notice  of  such  proposed  amend- 
ment shall  be  stated  in  the  call  for  the  meeting. 
By-laws  adopted. 

Henry  Richardson, 
William  Carleton, 
Geo.  B.  Graves, 
George  L.  Dunning, 
Walter  S.  Thompson, 

Trustees. 


366 


BUENA   VISTA   FRUIT   COMPANY 

BUENA   VISTA   FRUIT  COMPANY 

Declaration  of  Trust 

An  Agreement  and  Declaration  of  Trust  made  this 
Twenty-seventh  day  of  December,  a.d.  1907,  by  and  be- 
tween the  parties  hereto  establishing 

The  Buena  Vista  Fruit  Company 

Article  I 

The  Trustees  under  this  agreement  shall  be,  unless  and 
until  changed  as  hereinafter  provided, 

Henry  Richardson 
William  Carleton 
George  B.  Graves 
George  L.  Dunning 
Walter  S.  Thompson 

who  shall  sign  this  instrument,  which  signatures  shall  be 
taken  as  conclusive  as  to  their  appointment  and  acceptance 
hereunder. 

Article  II 

Henry  Richardson 
William  Carleton 
George  B.  Graves 
George  L.  Dunning 
Walter  S.  Thompson 

Trustees  hereunder,  shall  hold  the  title  of  all  real  estate  and 
personal  property  acquired  for  the  purposes  of  the  trust,  and 
shall  execute  all  conveyances,  assignments,  transfers  and 
instruments  affecting  the  same  for  the  purposes  of  the  trust, 
and  shall  exercise  all  of  the  powers  vested  in  them  as  such 
Trustees. 

Article  III 

It  is  expressly  understood  and  agreed  that  no  title,  in- 
terest or  estate  in  any  land,  buildings  or  other  property 
held  by  the  said  Trustees  at  any  time  hereunder,  is  to 
vest  in  any  of  the  shareholders,  but  the  same  is  to  be  and  to 
remain  in  said  Trustees,  their  successors  and  assigns;   that 

367 


APPENDIX  OF   FORMS 

the  sole  right,  claim  and  interest  of  each  shareholder  shall 
be  in  the  contract  of  the  Trustees  hereunder  to  hold,  manage 
and  dispose  of  said  property  and  account  for  the  income  and 
proceeds  thereof  in  the  manner  provided  for  in  this  instru- 
ment; and  that  the  shares  represented  by  the  certificates, 
therefore,  are  to  be  and  remain  as  to  title  personal  property 
only,  and  held,  bequeathed,  assigned,  disposed  of  and  dis- 
tributed as  personal  estate.  At  all  meetings  shareholders 
shall  be  entitled  to  one  vote  for  each  share  and  may  vote  by 
proxy. 

Article  IV 

The  terms  "said  Trustees"  and  "the  Trustees"  whenever 
used  shall  mean  the  Trustees  above  named  and  whoever  may 
be  Trustees  for  the  time  being. 

Article  V 

All  powers  vested  in  the  Trustees  may  be  exercised  by  a 
majority  of  the  Trustees  for  the  time  being  or  by  the  sur- 
vivor or  continuing  Trustee  in  the  event  of  a  vacancy. 

Article  VI 

The  sum  of  $10.00  shall  constitute  one  share  of  the  Trust 
and  the  certificate  or  certificates  shall  be  issued  therefor  in 
such  form  as  the  Trustees  may  from  time  to  time  provide 
and  shall  be  signed  by  a  majority  of  the  Trustees. 

Article  VII 

The  term  "shareholder"  used  in  this  instrument  shall 
mean  the  holder  of  a  certificate  of  a  share  or  shares  issued 
under  this  Trust  according  to  the  records  of  the  Trustees. 
Every  such  holder  of  a  share  or  shares  becomes  a  party 
hereto  upon  receiving  a  certificate  therefor  and  ceases  to  be 
a  party  hereto  upon  parting  with  the  same.  The  death  of 
any  shareholder  during  the  continuance  of  this  trust  shall 
not  operate  to  determine  the  trust  nor  shall  it  entitle  the 
legal  representative  of  such  deceased  shareholder  to  an  ac- 
count or  to  take  any  action  in  the  courts  or  otherwise  against 
the  Trust  or  the  TruRt(K>s;  but  the  executors,  administrators 
or  assigns  of  the  decedent  shall  accede  to  all  the  rights  of 
the  decedent  under  this  trust  upon  proper  proof  of  title. 
Shares  shall  be  transferable  as  against  the  Trustees  only  on 

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BUENA   VISTA   FRUIT   COMPANY 

the  books  of  the  Trustees  and  upon  the  surrender  of  the  out- 
standing certificate;  and  until  such  transfer  the  Trustees 
may  deal  with  the  record  owner  thereof  and  such  dealings 
shall  be  conclusive  upon  all  the  parties. 

Article  VIII 

The  purposes  of  the  Trust  shall  be: — 

(a)  To  acquire  any  parcels  or  parcel  of  real  estate  or 
interest  therein  and  manage,  lease,  develop,  improve  and 
hold,  mortgage  or  sell  the  same. 

(6)  To  enter  into,  execute,  adopt  and  fulfil  any  contract 
for  the  erection,  alteration  or  repair  of  any  structure  upon 
real  estate. 

(c)  To  act  as  agent  or  Trustee  in  the  care  and  management 
of  real  and  personal  property  committed  to  it  by  deed  of 
Trust  or  otherwise;  to  receive  for  investment  the  funds 
of  any  person,  firm  or  corporation  or  association  and 
to  pay  out  the  same  as  directed  by  such  person,  firm, 
corporation  or  association  and  to  deal  and  trade  in  stocks, 
bonds,  securities,  goods,  wares  and  merchandise  of  every 
description. 

(d)  To  have,  purchase,  convey,  mortgage  and  lease  within 
or  without  the  Commonwealth  of  Massachusetts,  such  real 
or  personal  property  as  the  purposes  of  the  Trust  may 
require. 

(e)  To  do  any  and  all  of  the  things  in  this  certificate  set 
forth  as  business  purposes,  powers,  or  otherwise  to  the  same 
extent  and  as  fully  as  natural  persons  might  or  could  do,  and 
in  any  part  of  the  world,  as  principals,  agents,  contractors. 
Trustees  or  otherwise. 

Article  IX 

It  shall  be  the  duty  of  the  Trustees  subject  to  maintaining 
a  proper  cash  balance  to  invest  all  monies  coming  to  them 
in  accordance  with  the  provisions  of  Article  8  hereof.  They 
shall  keep  full  and  proper  books  of  account  in  such  form  as 
to  distinctly  show  all  receipts  and  their  sources  and  all  dis- 
bursements and  their  purposes;  and  keep  other  books  in 
proper  form  to  show  the  original  and  all  other  shareholders, 
their  residences  and  shares  held  by  each.  They  shall  open 
their  books  at  all  times  during  business  hours  to  the  inspec- 
tion of  any  shareholder  and  investor. 

369 


APPENDIX   OF   FORMS 

Article  X 

The  Trustees  shall  have  power  to  employ  such  attorneys, 
agents,  clerks  and  a  treasurer,  and  to  fix  the  duties  to  be 
performed  by  them,  to  hire  such  office  room  as  they  may 
deem  expedient;  to  employ  agents  to  procure  contracts;  to 
fix  their  0"«ti  compensation;  to  use  and  expend  the  monies 
of  the  Trust  in  any  way  that  in  their  judgment  wall  advance 
the  purposes  of  the  trust  or  assist  the  accomplishment  of  its 
business;  to  deed,  mortgage,  lease,  conveyance  or  other 
instrument;  and  to  distribute  ratably  among  the  share- 
holders as  dividends  such  portion  of  the  net  income  as  they 
may  deem  expedient.  Their  decision  as  to  the  ratable  pro- 
portion due  the  several  shareholders  shall  be  final  and  pay- 
ment of  any  dividend  to  stockholders  of  record  shall  be  con- 
clusive upon  all  parties. 

Article  XI 

All  contracts  and  engagements  entered  into  by  the  Trus- 
tees and  all  conveyances  and  instruments  executed  by  said 
Trustees  shall  be  in  their  respective  names  as  Trustees  and 
shall  provide  against  any  personal  liability  on  the  part 
of  the  Trustees  and  stipulate  that  no  other  property 
shall  be  answerable  than  the  property  in  the  hands  of 
the  Trustees. 

Article  XII 

The  Trustees  shall  not  be  answerable  for  each  other  but 
each  shall  be  answerable  onl}^  for  his  own  wilful  default  or 
neglect.  "No  Trustee  shall  be  required  as  such  to  furnish 
sureties. 

Article  XIII 

Shareholders  representing  two-thirds  in  value  of  the  out- 
standing shares  may  by  a  written  notice  remove  either  or 
any  of  the  Trustees  at  any  time  A\athout  assigning  any  cause; 
but  in  the  event  of  such  removal  the  notice  thereof  shall  ap- 
point some  person  to  fill  the  vacancy  created.  The  notice 
of  removal  shall  be  addressed  to  each  of  the  Trustees,  shall 
state  the  fact  of  removal,  the  time  the  removal  shall  take 
effect,  the  name  and  address  of  the  Trustee  to  fill  the  vacancy, 
and  be  signed  Ijy  several  shareholders  who  shall  affix  to  their 
signatures  the  number  of  shares  they  respectively  own.     It 

370 


BUENA   VISTA   FRUIT   COMPANY 

shall  be  acknowledged  by  one  or  more  of  the  signers  and 
shall  be  served  upon  each  of  the  Trustees  within  the  state  by- 
copy  by  any  officer  qualified  to  serve  civil  process  in  the 
same  manner  that  writs  may  be  served  and  the  original  with 
the  return  thereof  shall  be  recorded  in  the  city  clerk's  records 
for  Boston  and  the  County  of  Suffolk  within  five  days  after 
its  service  is  completed. 

Article  XIV 

The  office  of  Trustee  may  be  vacated :  — 
(a)  By  removal  as  provided  in  paragraph  13  hereof. 
(6)  By  written  resignation  addressed  to  the  remaining 
Trustees  and  delivered  to  one  of  their  number. 

Article  XV 

Except  as  provided  in  paragraph  13  any  vacancy  in  the 
office  of  Trustees  shall  be  filled  by  the  remaining  Trustees  by 
an  appointment  in  writing  under  their  hands;  and  upon 
executing  these  articles  in  token  of  his  acceptance  said 
appointee  shall  be  a  Trustee  subject  to  all  the  provisions 
hereof. 

Article  XVI 

The  Trustees  under  this  agreement,  now  or  hereafter  hold- 
ing office,  shall  deliver  to  their  successors  all  books,  papers, 
writings  and  memoranda  relating  to  the  business  of  the 
trust,  and  shall  execute  such  assignments,  transfers  and 
other  conveyances  that  may  be  deemed  advisable  or  expedi- 
ent to  facilitate  the  transaction  of  the  business  of  the  trust. 

Article  XVII 

The  Trust  shall  continue  for  the  term  of  twenty  years 
subject  to  the  provisions,  however,  of  the  following  para- 
graphs : 

Article  XVIII 

The  shareholders  shall  have  power  by  writing  signed  by 
two  shares  in  value  of  the  shareholders :  — 

(a)  To  terminate  the  Trust  at  any  earlier  period  than  that 
named  in  paragraph  17. 

(6)  To  terminate  the  Trust  by  requiring  the  Trustees  to 
convey  the  trust  estate  to  other  or  new  Trustees  upon  a  new 

371 


APPENDIX   OF   FORMS 

Trust  which  shall  be  for  the  benefit  of  all  the  shareholders  in 
proportion  to  their  respective  holdings. 

(c)  To  terminate  the  Trust  by  requiring  the  Trustees  to 
convey  the  Trust  Estate  to  a  corporation  having  power  inter 
alia  to  receive  the  estate  and  invest  the  same  as  herein  pro- 
vided and  whose  shares  shall  be  held  by  the  shareholders 
hereunder  in  proportion  to  their  respective  holdings. 

Article  XIX 

Upon  the  distribution  or  conveyance  of  the  Trust  Estate 
as  provided  in  paragraphs  17  and  18,  the  Trustees  shall  be 
under  no  further  liability  to  any  persons. 

Article  XX 

This  agreement  may  be  amended  from  time  to  time  by  a 
vote  of  holders  of  a  majority  of  the  outstanding  shares  and 
the  amendments  shall  be  a  part  of  these  articles  and  binding 
upon  all  parties  hereto. 

Article  XXI 

This  instrument  takes  effect  and  becomes  binding  upon 
all  present  and  future  shareholders  of  stock  of  said  associa- 
tion. 

In  Witness  Whereof  the  said  Trustees  have  hereunto 
set  their  hands  and  seals  in  token  of  the  acceptance  of  the 
trust. 

(Signatures  of  Trustees) 

(Acknowledgment  by  Trustees) 


372 


F 

BOSTON  SUBURBAN   ELECTRIC  COMPANIES 

Agreement  and  Declaration  of  Trust  of  the  Boston 
Suburban  Electric  Companies  (as  amended  under 
Article  XIII,  May  27  and  December  5,  1907) 

This  Agreement  made  this  25th  day  of  November,  1901, 
by  and  between  Adams  D.  Claflin,  William  F.  Hammett 
and  Alden  E.  Viles,  together  with  their  assigns,  hereinafter 
designated  as  the  "Subscribers,"  and  Leonard  D.  Ahl,  Adams 
D.  Claflin,  William  H.  Coohdge,  William  F.  Hammett, 
Sydney  Harwood,  Frederic  H.  Lewis,  George  W.  Morse, 
Horace  B.  Parker,  Alfred  Pierce,  Frank  W.  Remick,  James 
L.  Richards,  Charles  W.  Smith,  Jerome  C.  Smith,  R.  Elmer 
Townsend  and  Alden  E.  Viles,  together  with  their  successors, 
hereinafter  designated  as  the  "Trustees,"  Witnesseth: 
that 

Whereas  the  subscribers  propose  to  transfer,  assign,  con- 
vey and  deliver  to  the  trustees,  or  to  cause  to  be  transferred, 
assigned,  conveyed  and  delivered  to  the  trustees,  under  the 
designation  of  the  Boston  Suburban  Electric  Companies 
certain  property  as  more  particularly  described  and  set  forth 
in  a  schedule  identified  by  the  signatures  of  the  parties 
hereto  and  filed  with  the  trustees;  and  whereas  the  trustees, 
for  the  purpose  of  defining  the  interest  of  the  subscribers 
and  their  assigns  in  such  property,  have  agreed  to  issue  to 
the  subscribers  negotiable  certificates  or  evidences  of  in- 
terest as  cestuis  que  trustent,  to  the  number  of  forty-five 
thousand  shares,  of  which  twenty-five  thousand  shall  be 
preferred  and  twenty  thousand  shall  be  common. 

Now,  therefore,  the  trustees  hereby  declare  that  they 
will  hold  said  property  so  to  be  transferred  to  them,  as  well 
as  all  other  property  which  may  be  hereafter  transferred  to 
them  or  which  they  may  acquire  as  such  trustees,  together 
with  the  proceeds  thereof,  and  all  money  and  securities  here- 
after received  by  them  in  trust  to  manage,  invest,  reinvest 
and  dispose  of  the  same,  and  to  collect,  receive  and  distribute 

373 


APPENDIX  OF  FORMS 

the  income  and  profits  thereof  for  the  benefit  of  the  holders 
from  time  to  time  of  the  certificates  of  shares  from  time  to 
time  issued  and  outstanding  hereunder,  in  the  manner  and 
subject  to  the  stipulations,  conditions  and  limitations  herein 
contained,  to  "^it: 

First.  The  trustees  in  their  collective  capacity,  and  so 
far  as  practicable  and  convenient,  shall  be  designated  by  and 
act  under  the  name  of  the  Boston  Suburban  Electric  Com- 
panies and  under  that  name  shall,  so  far  as  practicable,  con- 
duct all  business  and  execute  all  instruments  in  writing  in 
the  performance  of  their  trust. 

Second.  The  trustees  shall  always  be  fifteen  in  number, 
and  of  the  trustees  herein  mentioned  by  name,  William  H. 
Coolidge,  Frederic  H.  Lewis,  George  W.  INIorse,  Horace  B. 
Parker  and  R.  Ehner  Townsend,  shall  hold  office  until  the 
first  annual  meeting  of  the  shareholders;  Alfred  Pierce, 
Frank  W.  Remick,  James  L.  Richards,  Charles  W.  Smith 
and  Jerome  C.  Smith,  shall  hold  office  until  the  second  annual 
meeting  of  the  shareholders;  and  Leonard  D.  Ahl,  Adams  D. 
Claflin,  William  F.  Hammett,  Sydney  Harwood  and  Alden 
E.  Viles,  shall  hold  office  until  the  third  annual  meeting  of 
the  shareholders;  except  that  said  trustees,  as  well  as  any 
trustees  hereafter  elected,  shall  in  all  cases  hold  office  until 
their  successors  have  been  elected  and  accepted  this  trust. 

The  shareholders  shall  at  each  annual  meeting  or  adjourn- 
ment thereof  elect  five  trustees  to  serve  for  a  term  of  three 
years  next  ensuing.  In  case  of  a  vacancy  arising  in  the  board 
of  trustees  by  failure  to  elect,  resignation,  inability  to  act  or 
for  any  cause,  the  remaining  trustees  may  appoint  a  trustee 
to  fill  such  vacancy  for  the  unexpired  term. 

Whenever  any  change  shall  occur  in  the  board  of  trustees, 
the  legal  title  to  the  stock  and  other  property  held  in  trust 
shall  pass  to,  and  vest  in  the  successors  of  said  trustees  with- 
out any  formal  transfer  thereof.  But  if  at  any  time  such  for- 
mal transfer  shall  be  deemed  necessary  or  advisable,  it  shall 
be  the  duty  of  the  board  of  trustees  to  obtain  the  same  and  it 
shall  be  the  duty  of  any  retiring  trustee,  or  the  administrator 
or  executor  of  any  deceased  trustee  to  make  said  transfer. 

Third.  The  trustees  shall  have  and  exercise  the  exclusive 
management  and  control  of  all  property  at  any  time  belong- 
ing to  tills  trust,  with  all  the  rights  and  powers  of  absolute 
owners  thereof,  subject  only  to  the  purpose  of  this  agree- 

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BOSTON   SUBURBAN   ELECTRIC  COMPANIES 

ment;  they  may  adopt  and  use  a  common  seal;  they  shall 
have  power  to  vote  in  person  or  by  proxy  upon  all  certifi- 
cates of  stock  at  any  time  belonging  to  the  trust,  and  to 
collect,  receive  and  receipt  for  the  dividends  thereon;  to 
contract  with  each  or  any  of  the  companies  in  which  they 
may  hold  stock  as  said  trustees  in  respect  of  any  matter  or 
matters  relating  to  the  conduct  of  the  business  of  any  such 
company  or  companies;  to  collect,  sue  for,  receive  and  re- 
ceipt for,  all  sums  of  money  at  any  time  coming  due  to  said 
trust;  to  employ  counsel;  to  begin,  prosecute,  defend  and 
settle  suits  at  law,  in  equity  or  otherwise,  and  to  compromise 
or  refer  to  arbitration  any  claims  in  favor  of  or  against  the 
trust;  they  may  also,  with  the  consent  of  not  less  than  ten 
of  their  number  given  at  a  meeting  called  for  that  purpose, 
but  not  otherwise,  exchange,  upon  such  terms  as  may  be 
agreed  upon,  the  stock  or  securities  held  by  them  in  any  cor- 
poration for  the  stock  or  securities  of  any  other  corporation 
taking  over  the  property  of  such  corporation  by  consolida- 
tion or  otherwise;  may  with  such  consent,  but  not  other- 
wise, loan  money  to  any  corporations  in  which  they  may  at 
any  time  own  any  shares  of  capital  stock  and  may  subscribe 
for  or  acquire  additional  stock  or  the  securities  or  obligations 
of  any  such  corporations;  and  may  with  such  consent,  but 
not  otherwise,  subscribe  for,  purchase,  acquire  and  hold  the 
bonds  of  the  United  States,  of  any  county  or  of  any  State, 
or  of  a  county,  city  or  town  of  any  State  of  the  United  States 
of  America,  which  has  not  at  any  time  repudiated  any  of 
its  debts;  and  may  with  such  consent,  but  not  otherwise, 
also  subscribe  for,  purchase,  acquire  and  hold  shares  in  the 
capital  stock  or  securities  of  any  corporations,  (1)  owning 
or  operating  railways  or  railroads  or  engaged  in  the  business 
of  transporting  merchandise,  mails  or  express  matter,  or 
(2)  engaged  in  whole  or  in  part  in  supplying  light,  water, 
heat,  power  or  entertainment,  or  (3)  engaged  in  manufac- 
turing or  in  any  way  dealing  in  any  articles  used  by  any 
such  corporations,  or  (4)  engaged  in  the  business  of  insuring 
corporations  of  any  or  all  of  the  foregoing  classes  against 
loss  by  fire  or  casualty,  or  (5)  engaged  in  the  business  of  ad- 
vertising in  the  cars  or  upon  the  premises  of  railway  or  rail- 
road companies,  or  (6)  with  the  concurrent  consent  of  the 
holders  of  a  majority  of  each  class  of  the  outstanding  shares 
given  at  a  meeting  called  for  that  purpose,  in  the  shares  of 

375 


APPENDIX   OF   FORMS 

stock  and  securities  in  any  corporation  engaged  in  any- 
other  business  not  hereinbefore  included. 

The  trustees  may  also,  with  the  consent  of  not  less  than 
ten  of  their  number  given  as  aforesaid,  subscribe  for,  pur- 
chase or  otherwise  acquire  and  own  the  stocks,  shares,  obliga- 
tions and  securities  of  any  trust,  association  or  partnership 
engaged  in  whole  or  in  part  in  any  business  of  the  charac- 
ter above  specified,  and  the  stock,  shares,  obhgations  and 
securities  of  any  corporation,  trust,  association  or  partner- 
ship, including  the  stock,  shares,  obligations  and  securities 
of  this  trust,  which  owns,  or  whose  stocks,  shares,  obhgations 
or  securities  are  based  upon  or  secured  b}^  the  stocks,  shares, 
obligations  or  securities  of  any  corporation,  trust,  associa- 
tion or  partnership  of  the  character  above  mentioned. 

The  trustees  may  also  with  the  consent  of  not  less  than 
ten  of  their  number  given  as  aforesaid  from  time  to  time 
sell  at  pubhc  or  private  sale,  release,  exchange,  mortgage, 
pledge  or  otherwise  dispose  of  or  encumber  any  or  all  of 
the  property  from  time  to  time  held  by  them,  for  such  prices 
either  in  cash  or  in  the  stocks,  shares,  obligations  or  securi- 
ties of  other  corporations,  trusts,  associations  or  partner- 
ships, and  upon  such  terms  as  to  credit  or  otherwise  as  they 
may  deem  expedient. 

So  far  as  strangers  to  this  trust  are  concerned,  a  resolution 
of  the  trustees  authorizing  a  particular  act  to  be.  done  shall 
be  conclusive  e\ddence  in  favor  of  such  strangers  that  such 
act  is  within  the  powers  of  the  trustees,  and  no  purchaser 
from  the  trustees  shall  be  bound  to  see  to  the  apphcation 
of  the  purchase  money  or  other  consideration  paid,  or  de- 
livered by  or  for  said  purchaser  to  or  for  said  trustees. 

Fourth.  Stated  meetings  of  the  trustees  shall  be  held  as 
they  may  from  time  to  time,  bj'  vote  or  by-law,  prescribe, 
and  other  meetings  shall  be  held  from  time  to  time  upon  the 
call  of  the  president,  or  any  tlu-ee  of  the  trustees.  A  ma- 
jority of  the  board  shall  constitute  a  quorum,  and  the  con^ 
currence  of  all  the  trustees  shall  not  be  necessary  to  the 
validity  of  any  action  done  by  them,  but  the  wish  of  the 
majority  of  the  trustees  present  and  voting  at  any  meeting, 
as  evidenced  by  a  resolution  of  such  majority,  shall  be  con- 
clusive, except  as  hereinbefore  or  hereinafter  specifically 
provided;  and  the  certificate  of  the  secretary  of  the  trustees 
shall  be  conclusive  as  to  the  regularity  of  any  meeting  of  the 

37(3 


BOSTON   SUBURBAN   ELECTRIC   COMPANIES 

trustees,  the  presence  thereat,  and  concurrence  in  any  ac- 
tion, vote  or  resolution  there  taken,  of  a  majority  of  the 
trustees,  and  as  to  any  other  facts  or  statements  in  such 
certificate  set  forth.  The  trustees  may  make,  adopt,  amend 
or  repeal  such  by-laws,  rules  and  regulations  not  inconsistent 
with  the  terms  of  this  instrument  as  they  may  deem  neces- 
sary or  desirable  for  the  conduct  of  their  business,  and  for 
the  government  of  themselves  and  their  agents,  servants 
and  representatives. 

They  may,  as  such  trustees,  hold  either  in  their  joint 
names,  or  in  the  name  of  the  trust,  or  in  their  several  names, 
or,  under  such  safeguards  against  loss  as  may  be  advised  by 
counsel,  in  the  name  of  such  other  persons  as  they  may  from 
time  to  time  determine,  any  of  the  property  of  the  trust. 

Fifth.  The  trustees  shall  annually  elect  from  among  their 
number  a  President  and  a  Vice-President  of  the  board,  and 
shall  also  annually  elect  a  Treasurer  and  a  Secretary,  and 
they  shall  have  authority  to  appoint  such  other  officers, 
agents  and  attorneys  as  they  may  from  time  to  time  deem 
necessary  or  expedient.  They  shall  have  authority  to  ac- 
cept resignations  and  to  fill  any  vacancy  in  the  office  of 
President,  Vice-President,  Treasurer,  or  Secretary,  for  the 
unexpired  term;  and  shall  likewise  have  authority  to  elect 
temporary  officers,  to  serve  during  the  absence  or  disability 
of  regular  officers.  The  President,  Vice-President,  Treas- 
urer and  Secretary  shall  have  such  authority  and  perform 
such  duties  as  may  from  time  to  time  be  determined  by  the 
trustees.  The  Secretary  shall  be  sworn  to  the  faithful  per- 
formance of  his  duties.  The  trustees  shall  fix  the  compensa- 
tion, if  any,  of  all  officers  and  agents  whom  they  may  appoint, 
and  are  likewise  authorized  to  pay  to  themselves  such  com- 
pensation for  their  own  services  as  they  may  deem  reason- 
able, not  exceeding,  however,  in  the  aggregate,  the  amount 
of  one  per  centum  on  the  gross  income  of  the  trust  property 
in  lieu  of  the  percentage  upon  the  gross  income,  as  usually 
allowed  by  the  Courts  of  the  Commonwealth  of  Massachu- 
setts to  trustees  under  wills  and  other  instruments,  but  any 
trustee  may  be  employed  by  the  trustees  to  perform  any 
special,  legal,  financial  or  other  service  and  may  be  elected 
or  appointed  to  any  office,  and  shall  in  any  such  case  be  en- 
titled to  receive  such  additional  compensation  as  the  trus- 
tees may  fix  and  determine;   the  aggregate  compensation, 

377 


APPENDIX   OF  FORMS 

and  the  limitation  thereof  hereinbefore  stated  being  in- 
tended and  hereby  declared  to  be  only  for  the  general 
services  of  the  trustees  in  their  collective  capacity  as  custo- 
dians and  managers  of  the  trust  property.  Any  trustee  may 
acquire,  hold,  own  and  dispose  of  shares  in  the  trust  in  his 
individual  name,  and  on  his  personal  account,  oi  jointly 
with  other  persons,  or  as  a  member  of  a  firm,  without  being 
thereby  disqualified  to  act  as  a  trustee,  and,  while  so  owning 
and  holding  any  trust  certificates  on  his  personal  account, 
shall  be  entitled  to  all  and  the  same  rights  and  privileges  of 
and  as  any  other  shareholder.  The  trustees  may  also  appoint 
from  among  their  number  an  executive  committee  of  three  or 
more  persons,  to  whom  they  may  delegate  such  of  the  powers 
herein  conferred  upon  the  trustees  as  they  may  deem  expe- 
dient, except  so  far  as  those  matters  are  concerned  in  which 
the  concurrent  action  of  at  least  ten  trustees  is  required. 

The  trustees  shall  not  be  liable  for  errors  of  judgment 
either  in  holding  property  originally  conveyed  to  them  or  in 
acquiring  and  afterwards  holding  additional  property,  nor 
for  any  loss,  arising  out  of  any  investment,  nor  for  any  act, 
or  omission  to  act,  performed  or  omitted  by  them,  in  the 
execution  of  this  trust  in  good  faith;  nor  shall  they  or  any 
or  either  of  them,  be  liable  for  the  acts  or  omissions  of  each 
other,  or  of  any  officer,  agent,  or  servant  appointed  by  or 
acting  for  them,  and  they  shall  not  be  obliged  to  give  any 
bond  to  secure  the  due  performance  of  this  trust  by  them. 

Sixth.  Shares  hereunder  shall  be  divided  into  preferred 
and  common  shares.  The  preferred  shares  shall  entitle  the 
holder  to  a  cumulative  quarterly  dividend  at  the  rate  of 
four  dollars  per  annum,  and  no  more,  the  same  to  be  paid 
or  set  apart  out  of  the  net  earnings  before  any  dividend  shall 
be  paid  or  set  apart  for  the  common  shares;  and  in  case  of 
liquidation,  the  proceeds  of  the  liquidation  shall  be  first 
applied  to  the  payment  to  the  registered  holders  of  preferred 
shares  of  the  sum  of  one  hundred  dollars  per  share  and  any 
accrued  and  unpaid  dividends  thereon,  and  the  balance 
remaining  thereafter  shall  be  divided  among  the  registered 
holders  of  common  shares  in  proportion  to  their  holdings. 
As  evidence  of  the  ownership  of  said  shares,  the  trustees 
shall  cause  to  be  issued  to  each  shareholder  a  negotiable 
certificate  or  certificates,  which  certificates  shall  be  substan- 
tially in  the  form  following,  to  wit: 

378 


BOSTON   SUBURBAN   ELECTRIC   COMPANIES 

(Form  of  Certificate  of  Preferred  Shares.) 

Boston  Suburban  Electric  Companies 
No Shares. 

Not  Subject  to  Assessment 

This  certifies  that 

is  the  holder  of 

preferred  shares  in  the  Boston  Suburban  Electric  Com- 
panies, which  he  holds  subject  to  an  Agreement  and  Declara- 
tion of  Trust,  dated  November 1901,  and  on  file  with 

the  Boston  Safe  Deposit  &  Trust  Company  which  is  hereby- 
referred  to  and  made  a  part  of  this  certificate. 

The  shares  in  said  Boston  Suburban  Electric  Companies 
are  divided  into  two  classes,  known  as  preferred  and  com- 
mon, and  the  holders  of  the  preferred  shares  are  entitled  to 
receive  dividends  out  of  the  net  earnings  of  the  Companies, 
at  the  rate  of  four  dollars  per  aimum,  and  no  more,  payable 
quarterly,  in  each  year,  which  shall  be  paid  or  set  apart 
before  any  dividends  shall  be  paid  or  set  apart  on  the 
common  shares. 

The  dividends  on  the  preferred  shares  are  cumulative 
and  if,  in  any  period  of  three  months,  quarterly  dividends 
at  the  rate  of  four  dollars  per  annum  are  not  paid  on  said 
preferred  shares,  the  accrued  and  unpaid  dividends  are  a 
charge  on  the  net  earnings  of  the  Companies,  payable  sub- 
sequently before  any  dividends  are  paid  upon  the  common 
shares. 

In  the  event  of  liquidation,  the  proceeds  of  liquidation 
will  be  first  applied  to  the  payment  to  the  holders  of  pre- 
ferred shares  of  the  sum  of  one  hundred  (100)  dollars  per 
share  and  any  accrued  or  unpaid  dividends  thereon;  and 
the  balance  remaining  thereafter  will  be  divided  among 
the  holders  of  common  shares  in  proportion  to  their 
holdings. 

This  certificate  must  be  signed  by  the  Transfer  Agent, 
and  by  the  Agent  to  register  transfers;  and  no  trans- 
fer hereof  will  be  of  any  effect  as  regards  the  Boston 
Suburban  Electric  Companies  until  this  certificate  has 
been  surrendered  and  the  transfer  recorded  upon  their 
books. 

In  witness  whereof,  the  trustees  under  said  Declaration 
of  Trust,  herein  designated  as  the  Boston  Suburban  Electric 

379 


APPENDIX  OF  FORMS 

Companies,  have  caused  their  common  seal  to  be  hereto 
aflaxed  and  this  certificate  to  be  executed  in  their  name  and 
behalf  by  their  President  and  Treasurer. 

Boston  Suburban  Electric  Companies. 

By 

President. 

Attest: 

Treasurer. 
Boston  Safe  Deposit  &  Trust  Co. 

Transfer  Agent. 

By 

By 

Massachusetts  National  Bank, 

Agent  to  Register  Transfers. 

By 

(Form  of  Transfer) 

For  value  received  I  hereby  sell,  assign,  transfer,  and 

deliver  to 

of    the   within 

named  shares  of  the  Boston  Suburban  Electric  Companies, 
I  hereby  request  that  said  transfer  be  recorded  on  the  books 
of  said  Companies.    . 

Witness  my  hand,  this day  of 

19 

Witness, 

(Form  of  Certificate  of  Common  Shares) 

Boston  Suburban  Electric  Companies 

No Shares. 

Not  Subject  to  Assessment. 

This    certifies    that is    the 

holder  of common  shares  in  the 

Boston  Suburban  Electric  Companies,  which  he  holds  sub- 
ject  to   an  Agreement  and   Declaration   of  Trust,   dated 

November 1901,  and  on  file  with  the  Boston  Safe 

Deposit  &  Trust  Company  which  is  hereby  referred  to  and 
made  a  part  of  this  certificate. 

380 


BOSTON   SUBURBAN   ELECTRIC  COMPANIES 

The  shares  in  said  Boston  Suburban  Electric  Companies 
are  divided  into  two  classes  known  as  preferred  and  common, 
and  the  holders  of  the  preferred  shares  are  entitled  to  receive 
dividends  out  of  the  net  earnings  of  the  Companies,  at  the 
rate  of  four  dollars  per  annum,  and  no  more,  payable  quar- 
terly in  each  year,  which  shall  be  paid  or  set  apart  before  any 
dividends  shall  be  paid  or  set  apart  on  the  common  shares. 

The  dividends  on  the  preferred  shares  are  cumulative  and 
if,  in  any  period  of  three  months,  quarterly  dividends  at  the 
raite  of  four  dollars  per  annum  are  not  paid  on  said  preferred 
shares,  the  accrued  and  unpaid  dividends  are  a  charge  on 
the  net  earnings  of  the  Companies,  payable  subsequently 
before  any  dividends  are  paid  upon  the  common  shares. 

In  the  event  of  liquidation,  the  proceeds  of  Hquidation  will 
be  first  applied  to  the  payment  to  the  holders  of  preferred 
shares  of  the  sum  of  one  hundred  (100)  dollars  per  share 
and  any  accrued  and  unpaid  dividends  thereon;  and  the 
balance  remaining  thereafter  will  be  divided  among  the 
holders  of  common  shares  in  proportion  to  their  holdings. 

This  certificate  must  be  signed  by  the  Transfer  Agent,  and 
by  the  Agent  to  register  transfers;  and  no  transfer  hereof 
will  be  of  any  effect  as  regards  the  Boston  Suburban  Electric 
Companies  until  this  certificate  has  been  surrendered  and 
the  transfer  recorded  upon  their  books. 

In  witness  whereof,  the  trustees  under  said  Declaration  of 
Trust,  herein  designated  as  the  Boston  Suburban  Electric 
Companies  have  caused  their  common  seal  to  be  hereto 
affixed  and  this  certificate  to  be  executed  in  their  name  and 
behalf  by  their  President  and  Treasurer. 

Boston  Suburban  Electric  Companies. 

By 

President. 

Attest: 

Treasurer. 
Boston  Safe  Deposit  &  Trust  Co. 

Transfer  Agent. 

By 

By 

Massachusetts  National  Bank, 

Agent  to  Register  Transfers. 

By : 

381 


APPENDIX   OF   FORMS 
(Form  of  Transfer) 

For  value  received  I  hereby  sell,  assign,  transfer,  and  de- 
liver to 

of  the  within  named  shares  of  the  Boston 

Suburban  Electric  Companies  and  I  hereby  request  that  said 
transfer  be  recorded  on  the  books  of  said  Companies. 

Witness  my  hand,  this day  of 19 . . . 

Witness, 

Said  certificates  may  be  transferred  at  any  time  by  the 
registered  holders  thereof,  or  by  their  personal  representa- 
tives, such  transfer  to  be  made  by  delivery  of  the  certificates 
to  the  transferee,  together  with  a  written  transfer  of  the 
same  of  a  written  power  of  attorney  to  sell,  assign  and  trans- 
fer the  same,  signed  by  the  registered  holder  of  the  certificate 
or  his  personal  representatives;  but  no  such  transfer  shall 
affect  the  right  of  the  trustees  to  treat  the  registered  holder 
of  the  certificate  as  the  holder  in  fact  until  the  certificate 
has  been  surrendered  and  the  transfer  has  been  duly  recorded 
on  the  books  of  the  trustees.  Each  transferee  or  holder  of  the 
certificate  shall  be  held  by  the  fact  of  his  acceptance  of  it  to 
have  assented  to  the  trusts  and  agreements  herein  set  forth. 

In  case  of  the  loss  or  destruction  of  any  certificate  issued 
by  the  trustees,  the  trustees  may,  under  such  conditions  as 
they  may  deem  expedient,  issue  a  new  certificate  or  certifi- 
cates in  the.place  of  the  one  lost  or  destroyed. 

Seventh.  The  trustees  may,  from  time  to  time,  for  the 
purpose  of  providing  means  for  the  acquisition  of  additional 
property  or  otherwise  accomplishing  the  purposes  of  this 
trust,  with  the  consent  of  not  less  than  ten  of  their  number 
given  at  a  meeting  called  for  that  purpose,  issue  and  dispose 
of  shares  in  addition  to  those  originallj'  issued  to  subscribers 
as  hcrcin])efore  stated,  so  that  the  total  number  of  shares 
issued  shall  be  not  exceeding  in  the  aggregate  thirty  thou- 
sand preferred  shares  and  thirty  thousand  common  shares; 
and  for  said  purposes  with  the  concurrent  consent  of  the 
holders  of  a  majority  of  each  class  of  the  outstanding  shares 
given  at  any  meeting  called  for  that  purpose,  borrow  money 
or  issue  and  dispose  of  shares  in  addition  to  the  aggregate 
number  above  mentioned,  upon  such  terms  and  in  such 
manner  as  the  shareholders  at  such'  meeting  may  determine. 

382 


BOSTON   SUBURBAN   ELECTRIC   COMPANIES 

Except  with  such  concurrent  consent  no  money  shall  be 
borrowed  and  no  shares  shall  be  issued  by  the  trustees  to  an 
amount  exceeding  thirty  thousand  preferred  shares  and 
thirty  thousand  common  shares. 

Eight.  The  trustees  may,  from  time  to  time,  declare  and 
pay  dividends  out  of  the  net  income  from  time  to  time  re- 
ceived by  them  from  dividends  upon  the  stocks  and  interest 
upon  the  bonds,  notes  and  other  obligations,  and  from  the 
income  or  profit  from  other  investments  of  the  trust  funds 
held  by  the  trustees  under  this  agreement  and  declaration  of 
trust,  but  the  amount  of  such  dividends  and  the  payment  of 
them  shall  be  wholly  in  the  discretion  of  the  trustees;  and 
the  trustees  shall  have  full  power  and  authority  to  determine 
what  portion  of  any  receipts  or  expenditures  ought  in  fair- 
ness to  be  treated  as  income,  and  shall  have  authority  to 
reserve  in  each  year  such  a  sum  as  they  deem  wise  from  the 
gross  income  actually  collected  as  a  reserve  or  surplus  fund, 
with  power  to  use  said  fund  or  the  proceeds  thereof  at  any 
time  for  the  maintenance  of  dividends,  or  to  treat  the  same 
or  any  part  thereof,  as  surplus  capital,  and  to  change  their 
determination  as  to  said  fund,  or  any  part  thereof,  from  time 
to  time  as  to  them  may  seem  prudent  and  expedient,  abso- 
lutely at  their  own  discretion;  except  that  the  dividends  on 
the  preferred  shares  shall  not  begin  to  accrue  until  January 
15th,  1902,  and  shall  be  payable  quarterly  on  the  Fifteenth 
days  of  January,  April,  July  and  October,  in  each  year, 
beginning  April  15th,  1902,  at  the  rate  of  four  dollars  per 
annum,  and  no  more,  and  shall  be  cumulative,  and  said 
quarterly  dividends  shall  be  paid  or  set  apart  before  any 
dividends  are  paid  on  the  common  shares. 

Ninth.  The  fiscal  year  of  the  trustees  shall  end  on  the 
thirtieth  day  of  September  in  each  year.  Annual  meetings, 
for  the  election  of  five  trustees  and  for  the  transaction  of 
other  business,  shall  be  held  in  Boston  on  the  Thursday 
following  the  first  Monday  of  December,  in  each  year, 
beginning  with  the  year  1902,  of  which  meetings  notice 
shall  be  given  by  the  Secretary,  by  mail,  to  each  share- 
holder, at  his  registered  address,  at  least  seven  days  before 
said  meeting. 

Special  meetings  of  the  shareholders  may  be  called  at  any 
time,  upon  seven  days'  notice,  given  as  above  stated,  when 
ordered  by  the  President  or  trustees.    At  all  meetings  of  the 

383 


APPENDIX   OF   FORMS 

shareholders,  each  holder  of  shares,  whether  preferred  or 
common,  shall  be  entitled  to  one  vote  for  each  share  held 
by  him,  and  any  shareholder  maj^  vote  by  proxy. 

No  business  shall  be  transacted  at  any  special  meeting  of 
the  shareholders,  miless  notice  of  such  business  has  been 
given  in  the  call  for  the  meeting. 

No  business  except  to  adjourn  shall  be  transacted  at  any 
meeting  of  the  shareholders  unless  the  holders  of  a  majority 
of  all  the  shares  outstanding  are  present  in  person  or  by 
proxy. 

Tenth.  The  death  of  a  shareholder  or  trustee  during  the 
continuance  of  this  trust  shall  not  operate  to  determine  the 
trust,  nor  shall  it  entitle  the  legal  representatives  of  the 
deceased  shareholder  to  an  accounting,  or  to  take  any  action 
in  the  courts  or  elsewhere,  against  the  trustees;  but  the 
executors,  administrators,  or  assigns  of  any  deceased  share- 
holder, shall  succeed  to  the  rights  of  said  decedent  under 
this  trust  upon  the  surrender  of  the  certificate  or  the  certifi- 
cates owned  by  him. 

The  ownership  of  shares  hereunder  shall  not  entitle  the 
shareholders  to  am^  share  in  or  to  the  trust  property  what- 
soever, or  right  to  call  for  a  partition  or  division  of  the  same. 
And  it  is  hereby  expressly  declared  and  agreed  that  a  trust, 
and  not  a  partnership,  is  created  by  this  instrument,  and 
that  the  shareholders  are  cestuis  que  trustent,  and  hold  no 
other  relation  to  the  trustees  than  those  of  cestuis  que  trust- 
ent with  only  such  rights  as  are  conferred  upon  them  as  such 
cestuis  que  trustent  hereunder. 

Eleventh.  The  trustees  shall  have  no  power  to  bind  the 
shareholders  personally,  and  the  subscribers  and  their  as- 
signs, and  all  persons  or  corporations  extending  credit  to, 
contracting  with,  or  having  any  claim  against  the  trustees, 
shall  look  only  to  the  funds  and  property  of  the  trust  for 
pajonent  under  such  contract  or  claim,  or  for  the  payment 
of  any  debt,  damage,  judgment  or  decree,  or  of  any  money 
that  may  otherwise  become  due  or  payable  to  them  from 
the  trustees,  so  that  neither  the  trustees  nor  the  shareholders, 
present  or  future  shall  be  personally  liable  therefor. 

In  every  written  order,  contract  or  obligation  which  the 
trustees  shall  give  or  enter  into,  it  shall  be  the  duty  of  the 
trustees  to  refer  to  this  declaration  and  to  stipulate  that 
neither  the  trustees  nor  the  shareholders  shall  be  held  to  any 

384 


BOSTON   SUBURBAN   ELECTRIC   COMPANIES 

personal  liability  under  or  by  reason  of  such  order,  con- 
tract or  obligation. 

The  purpose  of  this  trust  being  to  hold  for  investment  and 
profit  for  the  benefit  of  the  shareholders  as  cestuis  que 
trustent,  all  the  stocks,  bonds,  securities  and  other  property 
assigned,  transferred  and  conveyed  or  caused  to  be  assigned, 
transferred  and  conveyed  by  the  subscribers  to  the  trustees, 
and  to  make  such  further  investments  as  may  be  from  time 
to  time  determined  upon  in  accordance  with  the  provisions 
hereof,  and  from  time  to  time  to  change  such  investments 
and  to  re-invest  the  proceeds  realized  from  the  sale  of  any 
of  the  trust  property,  and  to  invest  such  further  funds  and 
moneys  as  may  at  any  time  be  paid  to  or  come  into  the  pos- 
session of  the  trustees  for  investment;  it  is  understood  and 
agreed  that  the  trustees  as  such  shall  have  no  power  to,  and 
shall  not  at  any  time  engage  in,  any  business  of  any  kind 
other  than  the  purchase,  holding  and  sale  of  property  as  and 
for  investments,  nor  to  make  any  contracts  except  such  as 
relate  to  the  purposes  aforesaid,  or  are  incidental  thereto, 
or  such  as  are  in  this  declaration  either  specifically  authorized 
or  to  be  reasonably  implied;  but  in  construing  the  terms  and 
provisions  of  this  declaration  and  the  authority  by  it  con- 
ferred upon  the  trustees,  they  shall  be  the  sole  judges  and 
their  decision,  or  that  of  a  majority  of  them  in  any  doubt- 
ful case,  or  in  any  case,  where  a  question  arises,  shall  be 
conclusive  and  binding. 

Twelfth.  This  trust  shall  continue  for  the  term  of  twenty- 
one  years,  at  which  time  the  then  board  of  trustees  shall 
proceed  to  wind  up  its  affairs,  liquidate  its  assets,  and  dis- 
tribute the  same  among  the  holders  of  preferred  and  com- 
mon shares  according  to  the  priorities  hereinbefore  expressed; 
provided,  however,  that  if  prior  to  the  expiration  of  said 
period,  the  holders  of  at  least  two-thirds  of  the  shares  then 
outstanding  shall,  at  a  meeting  called  for  that  purpose,  vote 
to  terminate  or  continue  this  trust,  then  said  trust  shall 
either  terminate  or  continue  in  existence  for  such  further 
period  as  may  then  be  determined;  provided  further,  how- 
ever, that  upon  the  request  of  the  holders  of  at  least  two- 
thirds  of  each  class  of  the  shares  then  outstanding  by  vote 
or  resolution  thereof  at  a  meeting  of  the  shareholders  called 
for  that  purpose  the  trustees  may,  if  it  seems  to  them  ju- 
dicious so  to  do,  convey  the  trust  property  to  new  or  other 

385 


APPENDIX   OF   FORMS 

trustees,  or  to  a  corporation  according  to  the  terms  of  such 
request  and  in  the  manner  stated  therein,  being  first  duly 
indemnified  for  any  outstanding  obhgations;  and  the  then 
trustees  upon  filing  with  the  said  Boston  Safe  Deposit  and 
Trust  Company  their  certificate,  or  that  of  a  majority  of  their 
number  that  they  have  complied  with  such  request,  shall  be 
under  no  further  obligations;  provided  further,  however, 
that  it  is  especially  understood  and  agreed  that  nothing  in 
this  provision  contained  shall  be  construed  as  making  it 
obligatory  upon  the  trustees  to  comply  with  such  request. 
For  the  purpose  of  winding  up  its  affairs  and  liquidating  the 
assets  of  the  trust  the  then  board  of  trustees  shall  continue 
in  office  until  such  duties  have  been  duly  performed. 

Thirteenth.  This  agreement  and  declaration  of  trust  may 
be  amended  or  altered,  except  as  regards  the  habilities 
of  the  trustees,  at  any  annual  or  special  meeting  of  the 
shareholders  with  the  consent  of  the  holders  of  at  least 
two-thirds  of  the  shares  of  each  class  then  outstanding; 
provided  notice  of  the  proposed  amendment  or  alteration 
shall  have  been  given  in  the  call  for  the  meeting;  and  in 
case  of  such  alteration  or  amendment,  the  same  shall  be 
attached  to  and  made  a  part  of  this  agreement,  and  a 
copy  thereof  shall  be  filed  with  the  Boston  Safe  Deposit  & 
Trust  Company. 

Fourteenth.  The  word  "Trustees,"  and  the  expression 
"said  trustees,"  and  "the  trustees,"  as  used  in  this  instru- 
ment shall  mean  the  trustees  for  the  time  being  under  these 
presents  and  the  word  "shareholders"  whenever  used  in 
this  instrument,  and  whenever  the  context  does  not  clearly 
require  another  meaning,  shall  mean  and  refer  to  the  holders 
for  the  time  being  of  the  issued  and  outstanding  certificates 
in  the  Boston  Suburban  Electric  Companies. 

In  Witness  Whereof,  the  said  Leonard  D.  Ahl,  Adams 
D.  Claflin,  Wilham  H.  Coolidge,  William  F.  Hammett, 
Sydney  Harwood,  Frederic  H.  Lewis,  George  W.  Morse, 
Horace  B.  Parker,  Alfred  Pierce,  Frank  W.  Remick,  James 
L.  Richards,  Charles  W.  Smith,  Jerome  C.  Smith,  R.  Elmer 
Townsend  and  Alden  E.  Viles,  hereinbefore  mentioned, 
have  hereunto  set  their  hands  and  seals,  in  token  of  their 
acceptance  of  the  trust  hereinbefore  mentioned,  for  them- 
selves and  their  successors,  and  the  said  Adams  D.  Claflin, 
William  F.  Hammett  and  Alden  E.  Viles,  have  hereunto 

38G 


BOSTON  SUBURBAN  ELECTRIC   COMPANIES 

set  their  hands  and  seals,  in  token  of  their  assent  to  and  ap- 
proval of  said  terms  of  trust,  for  themselves  and  their  assigns, 
the  day  and  year  first  above  written. 

Filed  in  the  Office  of  the  Commissioner  of  Corporations, 
June  2,  1910. 


387 


G 

LUDLOW  MANUFACTURING  ASSOCIATES 
Declaration  of  Trust 

[Dated  Januarj'  1st,  1902.  In  this  reprint  are  incorporated  the  several 
amendments  to  the  original  Trust  Declaration  made  January 
14th,  1904,  and  December  19th,  1911.  Filed  with  the  Old  Colony 
Trust  Company  of  Boston.] 

Whereas,  the  Ludlow  Manufacturing  Company,  a  cor- 
poration duly  incorporated  under  the  laws  of  the  Com- 
monwealth of  Massachusetts,  pursuant  to  votes  of  its 
Directors  and  stockholders,  has  conveyed  and  trans- 
ferred to  Richard  H.  Weld,  Charles  W.  Hubbard,  Cran- 
more  N.  Wallace,  John  E.  Stevens,  Ernest  W.  Bowditch, 
Francis  Blake,  William  D.  Winsor,  Emor  H.  Harding, 
Henry  0.  Under^''ood,  Trustees,  all  its  property  real  and 
personal  and  of  whatever  nature,  except  the  property'  real 
and  personal  described  in  a  schedule  hereto  annexed  marked 
"A";  and 

Whereas,  the  stockholders  of  said  Company  have  also 
respectively  transferred  to  said  Trustees  their  several  hold- 
ings of  the  shares  of  said  Company;  and 

Whereas,  all  the  said  property  and  shares  so  conveyed 
and  transferred  to  the  Trustees,  together  with  any  other 
property  hereafter  acquired  by  them,  is  and  are  to  be  held, 
used,  and  managed  upon  the  trusts  herein  declared,  and  for 
the  convenient  definition  of  the  several  interests  in  said  trust 
property  of  the  stockholders  of  said  corporation,  their  assigns 
and  legal  representatives,  the  same  has  been  divided  into 
Thirty  thousand  (30,000)  shares  of  the  par  value  of  One 
liundrcd  dollars  (SlOO)  each,  negotiable  certificates  for  which 
are  to  be  issued  to  said  stockholders,  their  assigns  and  legal 

388 


LUDLOW    MANUFACTURING  ASSOCIATES 

representatives,  in  the  proportion  of  their  holdings  of  stock 
in  said  corporation  as  shown  by  its  books  on  the  first  day  of 
January,  1902. 

The  said  Trustees  hereby  declare  that  all  the  prop- 
_erty  and  shares  conveyed  to  them  as  aforesaid,  together  with 
any  hereafter  acquired  by  them  under  the  provisions  of  this 
instrument,  is  and  are  to  be  held  for  the  account  and  benefit 
of  the  holders  from  time  to  time  of  the  certificates  of  shares 
issued  hereunder,  and  is  and  are  to  be  held,  used,  managed, 
and  administered  upon  the  trusts  and  in  the  mamier  fol- 
lowing :  — 

Article  I 

The  said  Trustees,  designating  themselves  so  far  as  may 
be  convenient  and  proper  by  the  name  of  the  "  Ludlow  Man- 
ufacturing Associates,"  may  use  and  employ  the  trust  prop- 
erty and  assets: 

First.  In  paying  the  corporate  debts  of  said  Ludlow  Man- 
ufacturing Company  and  in  discharging  the  liabilities  under 
contract  or  otherwise  of  said  Corporation; 

Second.  In  the  manufacture  at  Ludlow,  Springfield,  or 
Wilbraham,  of  flax,  hemp,  jute,  cotton,  wool,  silk,  and  other 
fibres,  and  in  the  manufacture  of  paper  and  carpets,  and  of 
machinery  or  other  articles  composed  in  whole  or  in  part 
of  wood  or  metal  —  the  said  manufacturing  enterprises  to 
be  carried  on  either  directly  or  through  corporations  or  other 
organizations  in  which  the  Trustees  own  a  controlling 
interest ; 

Third.  In  investments  in  the  shares  of  any  electric  light, 
railroad,  or  power  company  operating  in  whole  or  in  part 
in  the  City  of  Springfield,  or  in  the  towns  of  Palmer,  Chic- 
opee,  Ludlow,  and  Wilbraham,  and  in  contracts  with  any 
such  company  or  any  other  company  for  the  purchase  or 
sale  of  electricity; 

Fourth.  In  establishing  at  any  other  place  or  places 
within  or  without  the  Commonwealth  industries  simi- 
lar to  those  now  or  hereafter  established  on  their  prop- 
erties in  Ludlow,  Springfield,  or  Wilbraham  whenever  the 
interests  of  said  last  named  industries  may  render  such 
course  advisable  —  such  establishment  to  be  effected  by 
new  construction,  by  the  purchase  in  whole  or  in  part  of 

389 


APPENDIX  OF   FORMS 

existing  plants,  or  by  giving  in  exchange  for  the  stock 
or  securities  of  any  corporation  or  other  organization 
other  securities  owned  by  the  Trustees  or  shares  issued 
under  this  instrument; 

Fifth.  In  the  purchase,  sale,  renting,  or  leasing  of  real 
estate  and  power  of  any  description,  as  the  interests  of  the 
Trust  may  from  time  to  time  require,  and  in  improving  and 
developing  any  real  estate  or  water  power  held  by  them  by 
the  building  of  storage  reservoirs,  the  erection  of  buildings, 
the  construction  of  streets  and  sewers,  and  by  all  other 
methods  conducive  in  the  judgment  of  the  Trustees,  to  the 
■^-ise  and  profitable  use  of  said  real  estate  or  of  said  water 
power. 

To  enable  the  Trustees  to  fully  execute  this  Trust,  they 
are  hereby  empowered:  — 

1.  To  carry  on  any  business  above  described  according  to 
their  discretion  and  to  employ  therein  such  agents  or  agencies 
as  they  may  deem  expedient; 

2.  To  pay  all  taxes,  assessments,  and  necessary  expenses; 

3.  To  buy  any  property,  real  or  personal,  including  shares 
or  obligations  issued  hereunder,  and  any  rights,  fran- 
chises, privileges,  or  securities  which  the  conduct  of 
any  business  above  described  may  in  their  judgment 
require,  or  which  may  in  their  judgment  tend  to  pro- 
mote its  successful  prosecution  or  the  interest  of  the  share- 
holders, and  to  hold,  use,  lease,  or  sell  the  trust  property 
or  any  part  thereof  (except  as  hereinafter  provided)  at 
their  discretion; 

4.  To  borrow  money  for  any  business  above  described 
or  for  the  purchase  of  any  property  herein  authorized 
and  to  give  notes,  make  contracts  of  guaranty  or 
suretyship,  or  enter  into  other  obligations  therefor,  and 
to  pledge  the  personal  property  of  the  Trust  or  any  part 
thereof  (except  as  hereinafter  provided)  to  secure  such 
notes  or  obligations  or  any  contract  entered  into  in  the 
course  of  the  execution  of  this  Trust;  provided,  however, 
that  all  notes  or  obligations  given  for  money  borrowed 
shall  l)ear  the  written  approval  of  at  least  one  Trustee  in 
addition  to  the  signature  of  the  Treasurer  or  other  author- 
ized officer; 

5.  To  create  a  reserve  fund  by  investing  in  any  securities 
that  are  legal  investments  for  the  savings  banks  of  the  Com- 

390 


LUDLOW  MANUFACTURING  ASSOCIATES 

mon wealth  of  Massachusetts  or  of  the  State  of  New  York; 
also  to  make  loans  upon  such  collateral  securities  or  en- 
dorsements as  are  prescribed  by  statute  in  the  case  of  loans 
by  the  savings  banks  of  the  Commonwealth  of  Massachu- 
setts or  of  the  State  of  New  York, 

6.  To  exercise  exclusive  control  and  management  of  the 
trust  property;  to  vote  in  person  or  by  proxy  upon  all  shares 
of  stock  belonging  to  the  Trust  and  to  collect  and  receipt 
for  any  dividends  thereon,  provided,  however,  that  shares 
issued  hereunder  and  purchased  by  the  Trustees  for  the 
account  of  the  Trust  shall  not,  so  long  as  they  belong  to  the 
Trust,  either  receive  dividends  or  be  voted  at  any  meeting 
of  shareholders;  to  contract  with  any  company  controlled 
by  them,  to  begin  and  defend  legal  proceedings,  employ 
counsel,  and  compromise  or  arbitrate  claims;  and  generally 
to  do  all  acts  and  things  necessary  and  proper  for  the  com- 
plete execution  of  this  Trust  and  the  protection  of  the  in- 
terests of  shareholders  therein,  provided,  however,  that  the 
Trustees  shall  have  no  power  to  bind  the  shareholders  per- 
sonally by  any  contract,  express  or  implied,  or  by  any  act, 
neglect,  or  default;  that  neither  Trustees  nor  shareholders 
shall  be  personally  liable  on  any  such  contract  or  for 
any  such  act,  neglect,  or  default,  and  that  any  party 
to  such  contract  or  injured  by  such  act,  neglect,  or  de- 
fault shall  have  recourse  for  satisfaction,  payment,  or 
indemnity  solely  to  the  trust  estate;  that  for  any  judg- 
ment recovered  against  and  paid  by  the  Trustees,  they 
shall  be  entitled  to  reimburse  themselves  from  the  trust 
estate;  and  that  every  note,  bond,  obligation,  or  contract 
in  writing  made  or  given  by  the  Trustees  shall,  by  ex- 
plicit reference  to  this  Declaration  of  Trust,  give  notice 
of  the  limitations  upon  the  power  of  the  Trustees  and 
of  the  exemption  from  personal  liability  of  both  Trustees 
and  shareholders  and  shall  contain  an  express  declaration 
that  no  recourse  shall  be  had  in  any  event  to  any  Trustee 
or  shareholder. 

No  sale  or  mortgage  of  the  real  estate  of  the  Trust  nor  of 
any  of  its  industrial  establishments  nor  of  the  stock  of  the 
Ludlow  Manufacturing  Company,  and  no  lease  of  real  estate 
or  power  belonging  to  the  Trust  and  exceeding  the  annual 
rental  value  of  Ten  thousand  dollars  ($10,000)  shall  be  made 
by  the  Trustees  until  the  same  shall  have  been  first  approved 

391 


APPENDIX   OF  FORMS 

by  the  vote  of  two-thirds  in  interest  of  the  shares  entitled 
to  vote  under  this  Declaration  of  Trust  and  voted  by  the 
holders  thereof  in  person  or  by  proxj^  at  an  annual  or  special 
meeting  notified  as  herein  prescribed  and  the  call  for  which 
shall  state  that  such  sale,  mortgage,  or  lease  is  to  be  acted 
upon  at  said  meeting. 

Shares  issued  hereunder  and  bought  by  the  Trustees  for 
the  account  of  the  Trust  shall  be  reported  to  the  shareholders 
at  the  next  annual  meeting  after  such  purchase  and  be  dis- 
posed of  as  said  meeting  may  determine. 

Article  II 

A  majority  of  the  Trustees  shall  constitute  a  quorum  and 
any  action  taken  at  a  meeting  at  which  a  quonmi  is  present 
and  which  meeting  has  been  duly  notified  in  the  manner 
pre^-iously  prescribed  by  the  Trustees  shall  be  operative  and 
effective  as  the  act  of  all  the  Trustees;  pro^'ided,  however, 
that  the  approval  of  six  (6)  Trustees  given  at  a  duly  notified 
meeting  shaU  be  necessary'  for  action  on  all  matters  relating 
to  the  loaning  of  money,  the  absorption  of  new  plants  either 
by  purchase  or  otherwise,  the  starting  of  new  industries  in 
Ludlow,  Springfield,  or  Wilbraham,  and  the  estabhshment 
of  branch  industries  elsewhere. 

In  no  event  shall  any  purchaser  be  bound  to  see  to  the 
apphcation  of  the  purchase  monej'  or  other  consideration 
received  or  realized  upon  the  execution  of  any  deed,  bill  of 
sale,  mortgage,  transfer,  or  other  conveyance  authorized  as 
aforesaid,  and  so  far  as  strangers  to  the  Trust  are  concerned, 
a  resolution  of  the  Trustees  certified  as  such  by  their  Secre- 
tary and  authorizing  a  particular  act  to  be  done  shall  be 
conclusive  e\adence  that  such  act  is  within  the  powers  of  the 
Trustees. 

The  Trustees  shall  annually  elect  from  among  their  num- 
ber a  President,  and  shall  elect  from  among  their  number  or 
otherwise,  a  Treasurer,  Secretary,  and  in  their  discretion, 
Vice-Presidents,  Assistant  Treasurers,  Assistant  Secretaries, 
and  such  other  officers  or  agents  as  they  may  deem  advisable, 
and  may  act  in  any  manner  by  or  through  any  such  officer 
or  agent. 

The  Trustees  may  adopt  and  amend  from  time  to  time 
by-laws  for  the  conduct  of  their  business,  and  in  such  by- 

392 


LUDLOW  MANUFACTURING  ASSOCIATES 

laws  or  in  regulations  adopted  at  any  meeting,  may  define 
duties  of  their  officers,  agents,  servants  and  representatives. 

Article  III 

The  title  to  the  trust  property  of  every  description  and 
the  right  to  the  conduct  of  any  business  hereinbefore  de- 
scribed are  vested  exclusively  in  the  Trustees,  so  that  share- 
holders are  without  interest  therein  other  than  that  con- 
ferred by  their  shares  issued  hereunder,  and  shall  have  no 
right  to  call  for  any  partition,  accounting,  or  division  of 
property,  profits,  rights,  or  interests. 

Shares  shall  be  personal  property  giving  only  the  rights 
in  this  instrument  and  in  the  certificates  thereof  specifically 
set  forth.  The  death  of  a  shareholder  during  the  contin- 
uance of  this  Trust  shall  not  terminate  the  Trust  nor  give 
his  or  her  legal  representatives  a  right  to  an  account  or  to 
take  any  action  in  the  courts  or  otherwise  against  other  share- 
holders or  the  Trustees,  but  shall  simply  entitle  the  legal  rep- 
resentati"\;^es  of  the  deceased  to  demand  and  receive  a  new  cer- 
tificate of  shares  in  place  of  the  certificate  held  by  the  deceased, 
upon  the  acceptance  of  which  such  legal  representatives  shall 
succeed  to  all  the  rights  of  the  deceased  under  this  Trust. 

Article  IV 

The  profits  arising  from  the  conduct  of  the  affairs  of  the 
Trust  shall  from  time  to  time  and  whenever  the  Trustees 
shall  so  order  be  ratably  divided  among  the  shareholders 
of  record  at  the  time  of  declaring  a  dividend. 

The  Trustees,  however,  may  always  retain  such  amount 
of  such  profits  as  they  may  deem  necessary  to  pay  debts  or 
expenses  or  meet  obhgations  relating  to  the  Trust  or  as  they 
may  deem  desirable  to  use  in  the  conduct  of  its  affairs. 

Article  V 

The  shares  issuable  hereunder  by  the  Trustees  at  the  in- 
ception of  this  Trust  to  stockholders  of  the  Ludlow  Manu- 
facturing Company,  their  assigns  or  legal  representatives  — 
in  the  proportion  of  their  several  holdings  —  each  share  to 
be  of  the  par  value  of  One  hundred  dollars  (SlOO)  —  shall 
be  Thirty  thousand  (30,000)  in  all  and  shall  be  evidenced  by 
a  negotiable  certificate  or  certificates  in  the  form  following :  — 

393 


APPENDIX   OF  FORMS 

(Form  of  Certificate  of  Shares) 

"Ludlow  Manufacturing  Associates 
No Shares 

This  certifies  that the 

holder ....  of (  )  shares 

—  par  value  One  hundred  dollars  (SlOO)  each  —  of  the 
property  held  and  administered  in  trust  by  Trustees  acting 
under  the  name  of  the  Ludlow  ]Manufacturing  Associates 
and  in  accordance  with  and  subject  to  a  Declaration  of  Trust 
dated  January  1,  1902,  which  is  on  file  with  the  Old  Colony 
Trust  Company  and  which  is  hereby  referred  to  and  made 
a  part  of  this  certificate. 

This  certificate  must  be  signed  by  the  Old  Colony 
Trust  Company,  Transfer  Agent,  and  no  transfer  hereof 
shall  be  effectual  as  regards  the  Ludlow  IManufacturing 
Associates  until  this  certificate  has  been  surrendered  and 
the  transfer  recorded  upon  the  books  of  said  Transfer 
Agent. 

In  Witness  Whereof  the  Trustees  imder  said  Declara- 
tion of  Trust  herein  designated  as  the  Ludlow  IManufac- 
turing Associates  have  caused  their  common  seal  to  be  hereto 
affixed  and  this  certificate  to  be  executed  in  their  name  and 
behalf  by  their  President  and  attested  by  their  Secretary 
this day  of 19 

Ludlow  Manufacturing  Associates, 

By 


Attest:  .  . 
Signed : 


President. 
Secretary. 


Old  Colony  Trust  Company, 

Transfer  Agent. 

By 

Assistayit  Secretary. 

By 

Transfer  Clerk." 

394 


LUDLOW  MANUFACTURING  ASSOCIATES 

(Form  of  Transfer  of  Shares) 

For    value    received hereby    sell,    assign, 

transfer,  and  deliver  to the 

within  named  shares  of  the  Ludlow  Manufacturing  Asso- 
ciates and  request  that  said  transfer  be  recorded  on  the 
books  of  said  Transfer  Agent. 

Witness hand this 

day  of 19 ... . 

The  Trustees  shall  keep  books  of  record  of  the  certificates 
of  shares  originally  issued  hereunder  and  of  all  transfers 
thereof.  Upon  any  transfer  thereof,  a  new  certificate  or 
new  certificates  shall  be  issued,  being  first  recorded  and 
signed  by  the  Transfer  Agent  appointed  by  the  Trustees,  and 
only  shareholders  whose  certificates  are  so  recorded  shall 
be  entitled  to  vote,  or  to  collect  dividends,  or  to  otherwise 
exercise  and  enjoy  the  rights  of  shareholders. 

Each  shareholder  shall  in  writing  notify  the  Treasurer  of 
the  Trustees  of  his  post-office  address  —  which  may  be 
changed  by  a  like  notice  —  and  in  the  absence  of  any  such 
notice  from  a  shareholder  his  post-office  address  shall  be 
taken  to  be  Boston.  The  Treasurer  shall  file  a  memorandum 
of  the  addresses  of  shareholders  with  the  Transfer  Agent 
and  keep  it  informed  of  any  changes  therein. 

In  case  of  the  loss,  mutilation,  or  destruction  of  a  cer- 
tificate, the  Trustees  may  issue  a  new  one  upon  such  terms 
as  they  see  fit. 

Article  VI 

The  Trustees  may,  from  time  to  time,  with  the  consent 
of  the  holders  of  two-thirds  in  interest  of  the  shares  entitled 
to  vote  under  this  Declaration  of  Trust  and  voted  at  a  meet- 
ing the  call  for  which  shall  contain  specific  notice  of  the 
proposition  to  be  submitted,  issue  and  dispose  of  additional 
shares  for  such  purpose  and  in  such  manner  as  the  share- 
holders at  such  meeting  may  decide. 

Article  VII 

The  Trustees  shall  always  be  nine  (9)  in  number,  and  of 
the  Trustees  herein  mentioned  by  name  Francis  Blake, 
Cranmore  N.  Wallace,  Richard  H.  Weld,  shall  hold  office 
until  the  first  aimual  meeting  of  the  shareholders;    Ernest 

395 


APPENDIX  OF  FORMS 

W.  Bowditch,  Emor  H.  Harding,  Charles  W.  Hubbard  shall 
hold  office  until  the  second  annual  meeting  of  the  sharehold- 
ers; and  John  E.  Stevens,  Henry  O.  Underwood,  William  D. 
Winsor  shall  hold  office  until  the  third  annual  meeting  of  the 
shareholders,  except  that  said  Trustees  as  well  as  any  Trus- 
tees hereafter  elected  shall  in  all  cases  hold  office  until  their 
successors  have  been  elected  and  have  accepted  this  Trust; 
provided,  however,  that  by  written  notice  delivered  or  mailed 
to  the  Secretary  or  President  a  Trustee  may  resign  and  that 
such  resignation  shall  take  effect  either  immediately  or  at  a 
later  date  according  to  the  terms  of  said  notice. 

Stated  meetings  of  the  Trustees  shall  be  held  at  least  once 
a  month  and  other  meetings  shall  be  held  from  time  to  time 
upon  the  call  of  the  President  or  any  three  (3)  of  the  Trus- 
tees. The  vote  of  an  absent  Trustee  may  be  counted  pro- 
vided that  the  vote  in  the  form  entered  upon  the  records  is 
signed  by  him  and  attached  to  the  records,  and  for  the  pur- 
pose of  passing  said  vote  but  no  other  he  may  be  consid- 
ered as  present  if  necessary  to  form  a  quorum. 

The  Trustees  may  adopt,  and  from  time  to  time  amend 
or  repeal,  such  by-laws,  rules,  and  regulations  not  incon- 
sistent with  the  terms  of  this  instrument  as  they  may 
deem  necessary  or  desirable  for  the  conduct  of  business  and 
the  government  of  themselves  and  their  agents. 

The  Trustees  shall  not  be  liable  for  errors  of  judgment 
either  in  holding  property  originally  conveyed  to  them  or  in 
acquiring  and  afterwards  holding  additional  property,  or 
for  any  loss  resulting  from  any  investment,  or  from  any  act 
or  omission  to  act  performed  or  omitted  by  them  in  the  exe- 
cution of  this  Trust  in  good  faith.  They  shall  not  be  liable 
for  the  acts  or  omissions  of  any  officer,  agent,  or  servant  ap- 
pointed, by  or  acting  for  them,  nor  be  obliged  to  give  any 
bond  to  secure  the  due  discharge  of  their  trust,  nor  shall  any 
Trustee  be  liable  for  any  act  or  default  of  any  other  Trustee. 

Article  VIII 

The  fiscal  year  of  the  Trustees  shall  end  on  the  last  Satur- 
day of  December,  or  the  first  Saturday  of  January,  which- 
ever may  l)e  nearest  the  thirty-first  of  December.  Each 
annual  meeting  shall  ))e  held  in  Boston  on  the  third  Tues- 
day in  January  of  each  year,  beginning  with  the  year  1913, 
of  which  meeting  notice  shall  be  given  by  the  Secretary  by 

396 


LUDLOW  MANUFACTURING  ASSOCIATES 

mail  to  each  shareholder  at  his  registered  address  at  least 
ten  days  before  said  meeting. 

At  each  annual  meeting  of  the  shareholders,  the  Trustees 
shall  make  a  full  report  upon  the  affairs  of  the  Trust,  and 
upon  its  business  and  operations  during  the  year  preceding, 
together  with  a  statement  of  its  financial  standing  as  shown 
by  the  books  and  accounts  of  the  Treasurer. 

At  each  annual  meeting  shareholders  shall  elect  three  (3) 
Trustees  to  serve  for  the  term  of  three  (3)  years  next  ensuing. 

Upon  the  election  of  any  Trustee  by  the  shareholders  or 
by  the  remaining  Trustees,  he  shall  execute  an  acceptance 
of  this  trust,  which,  together  with  a  certificate  of  the  Secre- 
tary of  the  Trustees  of  the  election  of  such  Trustee,  shall 
be  forthwith  filed  with  the  depositaries  at  that  time  having 
the  custody  of  this  instrument. 

In  case  of  the  death,  resignation,  or  inability  to  act  of  any 
Trustee,  the  remaining  Trustees  shall  forthwith  fill  the 
vacancy  for  the  unexpired  term.  Upon  any  election  of 
Trustees  by  the  shareholders,  or  by  the  remaining  Trustees 
in  the  case  of  vacancy,  the  trust  estate  upon  the  acceptance 
of  the  Trust  by  the  new  Trustees  or  Trustee  shall  vest  in 
them  or  him  and  the  continuing  Trustees  without  any  fur- 
ther act  or  conveyance. 

While  any  vacancy  exists  in  the  office  of  Trustee  from 
whatever  cause,  the  continuing  or  surviving  Trustees  or 
Trustee  shall  have  all  the  powers  and  discharge  all  the 
duties  granted  or  imposed  by  this  instrument. 

Each  Trustee  hereunder  shall  be  the  holder  of  at  least  Ten 
(10)  shares  and  shall  have  the  right  to  purchase  at  any  pub- 
lic or  private  sale  any  shares  or  securities  issued  hereunder. 

Special  meetings  of  shareholders  may  be  called  at  any 
time  upon  ten  (10)  days'  notice  given  as  above  stated  when 
ordered  by  the  President  or  the  Trustees.  At  all  meetings 
of  the  shareholders  each  holder  of  shares,  except  as  provided 
in  Article  1,  Section  Fifth,  Paragraph  6,  shall  be  entitled  to 
one  (1)  vote  for  each  share  held  by  him,  and  any  shareholder 
may  vote  by  proxy. 

No  business  shall  be  transacted  at  any  special  meeting 
of  shareholders  unless  notice  of  such  business  has  been  given 
in  the  call  for  the  meeting. 

No  business  except  to  adjourn  shall  be  transacted  at  any 
meeting  of  shareholders  unless  a  majority  in  interest  of  the 

397 


APPENDIX   OF   FORMS 

shares  entitled  to  vote  under  this  Declaration  of  Trust  are 
represented  by  the  holders  thereof  in  person  or  by  proxy. 

Article  IX 

This  Trust,  unless  sooner  terminated  by  the  shareholders 
in  the  manner  hereinafter  provided,  shall  continue  until  the 
first  day  of  January,  1950,  unless  all  of  said  above-named 
Trustees  and  all  successors  to  them  now  living  shall  have 
died  more  than  twenty-one  (21)  years  before  said  date,  in 
which  event  this  Trust  shall  terminate  at  the  expiration  of 
twenty-one  (21)  years  from  the  death  of  the  last  survivor 
of  said  Trustees  and  said  successors.  At  the  termination 
of  the  Trust,  the  Trustees  shall  wind  up  the  affairs  and  busi- 
ness of  the  Trust  and,  after  paying  and  satisfying  all  obliga- 
tions and  liabilities  thereof,  shall  divide  the  property  then 
in  their  hands  or  its  net  proceeds  ratably  among  the  share- 
holders. 

Article  X 

This  Declaration  of  Trust  may  be  altered  or  amended  or 
this  Trust  terminated  by  the  vote  of  two-thirds  in  interest 
of  the  shares  entitled  to  vote  hereunder  and  voted  by  the 
holders  thereof  in  person  or  by  proxy  at  any  meeting  of  the 
shareholders  duly  notified  pursuant  to  Article  VIII  by  a 
call  for  such  meeting  in  which  it  is  specifically  stated  that 
such  termination  or  such  alteration  or  amendment  is  to  be 
acted  upon.  In  case  of  a  vote  in  favor  of  such  termination 
or  of  such  alteration  or  amendment  as  the  case  may  be,  the 
President  and  the  Secretary  of  such  meeting  shall  certify 
such  vote  and  any  alterations  or  amendments  so  adopted  in 
writing  to  the  said  Trustees,  and,  when  the  Transfer  Agent 
has  certified  to  the  Trustees  that  the  shareholders  so  voting 
were  the  owners  of  shares  to  the  requisite  number  at  the  time 
of  such  meeting,  the  Trustees  shall,  if  the  vote  is  in  favor  of 
termination,  proceed  to  wind  up  this  Trust  in  accordance  with 
Article  IX,  and  in  case  such  vote  is  in  favor  of  alterations 
and  amendments,  shall  embody  the  same  in  a  Supplementary 
Declaration  of  Trust  which  they  shall  sign  and  deliver  to  said 
Old  Colony  Trust  Company,  and  which,  being  so  executed 
and  deliv(;red,  shall  be  conclusive  evidence  of  the  due  adop- 
tion by  the  shareholders  of  the  alterations  and  amendments 
ther(;in  contained  and  thereafter  shall  have  the  same  opera- 
tion and  effect  as  if  originally  embodied  in  this  instrument. 

398 


LUDLOW  MANUFACTURING  ASSOCIATES 

In  Witness  Whereof  the  said  Trustees  above  named  have 

hereunto  set  their  hands  this  first  day  of  January,  1902. 

Richard  H.  Weld, 

Charles  W.  Hubbard, 

Cranmore  N.  Wallace, 

Jno.  Ed.  Stevens, 

Ernest  W.  Bowditch, 

Francis  Blake, 

William  D.  Winsor, 

Emor  H.  Harding, 

H.  O.  Underwood, 

Trustees. 

Charles  W.  Hubbard, 

Cranmore  N.  Wallace, 

Ernest  W.  Bowditch, 

Francis  Blake, 

William  D.  Winsor, 

Emor  H.  Harding, 

H.  O.  Underwood, 

Sidney  Stevens, 

Philip  Stockton, 

Trustees. 
Commonwealth  of  Massachusetts  "I 

^^^^°^^  ^  ^^'     Boston,  March  3,  1902. 

Then  personally  appeared  the  above-named  Richard  H. 
Weld,  Charles  W.  Hubbard,  Cranmore  N.  Wallace,  John 
E.  Stevens,  Ernest  W.  Bowditch,  Francis  Blake,  Emor  H. 
Harding,  Henry  0.  Underwood,  and  severally  acknowledged 
the  foregoing  instrument  by  them  executed  to  be  their  free 
act  and  deed.  ^^^^^^  ^^^ 

Cyrus  F.  Cushing, 

Notary  Public. 
Commonwealth  of  Pennsylvania 


ss 
City  and  County  of  Philadelphia  J 

February  20,  1902. 

Personally  appeared  the  above  named  William  D.  Winsor 

and  acknowledged  the  foregoing  instrument  by  him  executed 

to  be  his  free  act  and  deed.  -d  -■ 

Before  me, 

Thos.  J.  Hunt, 

Commissioner  for  the  Commonweallh 

of  Massachusetts,  at  Philadelphia 

/a     n  Pennsylvania,  623  Walnut  Street. 

^^"^^^  399 


H 
BLANK  HOTEL  TRUST 

This  Indenture  made  at  Boston  in  Massachusetts  the 

of  day in  the  year  1912  between 

of  the  one  part  and 

(hereinafter  called  the  Trustees  which  expression  shall  ex- 
tend to  and  include  the  trustees  for  the  time  being  of  these 
presents  and  the  word  Trustee  shall  apply  to  any  one  of  the 
said  trustees  where  the  context  so  admits)  of  the  other  part. 

Whereas  the  lands  and  other  property  of  the  said 

the  particulars  whereof  are  specified  in  the  First  Schedule 
hereto  have  been  respectively  transferred  to  the  Trustees 

by  the  .  •. or  are  intended  to  be  forthwith  so 

transferred  to  the  intent  that  the  same  shall  be  held  upon 
the  trusts  hereinafter  expressed  concerning  the  same  to  be 
collectively  designated  as  the  Blank  Hotel  Trust. 

Now  this  Indenture  witnesseth  and  it  is  hereby  agreed 
and  declared  that  the  Trustees  shall  hold  the  said  real  estate 
and  other  property  and  the  investments  for  the  time  being 
representing  the  same  and  the  property  and  effects  at  any 
time  vested  in  them  for  the  purposes  of  these  presents  (here- 
inafter called  the  trust  premises)  in  trust  to  sell  and  con- 
vert into  money  the  said  real  estate  and  to  deal  with  the 
proceeds  thereof  and  the  other  property  comprised  in  these 
presents  in  the  manner  and  with  and  subject  to  the  powers 
and  provisions  hereinafter  contained  concerning  the  same 
for  the  benefit  of  the  holders  for  the  time  being  of  the  shares 
hereinafter  mentioned  (hereinafter  called  the  Shareholders) 
according  to  the  number  of  such  shares  held  by  them  respec- 
tively. But  the  Trustees  shall  have  power  to  postpone  the 
conversion  hereinbefore  directed  of  the  said  real  estate  or 
any  part  thereof  so  long  as  they  in  their  uncontrolled  dis- 
cn^tion  shall  think  proper  so  that  the  same  shall  not  be  post- 
poned l)('3'ond  the  time  herein  limited  for  the  continuance 
of  tlie  trusts  of  these  presents.     And  notwithstanding  any 

400 


BLANK   HOTEL  TRUST 

postponement  of  such  conversion  the  said  real  estate  shall 
be  considered  as  personal  estate  for  the  purposes  of  enjoy- 
ment and  transmission  and  the  rents  and  income  thereof 
shall  be  applied  as  if  they  were  the  income  of  the  proceeds 
of  such  conversion. 


The  Trustees 

1.  The  Trustees  shall  have  power  at  any  time  or  times 
and  from  time  to  time. 

(a)  To  manage  and  improve  all  lands  and  hereditaments 
for  the  time  being  subject  to  any  of  the  trusts  hereof  and 
to  erect  pull  down  alter  and  repair  buildings  thereon  and  to 
make  such  outlay  as  they  shall  think  proper  for  the  said  pur- 
poses and  to  insure  buildings  or  the  rents  or  rental  value 
thereof  against  loss  or  damage  by  fire  or  other  casualty  and 
to  insure  against  liability  for  damage  to  person  or  property 
arising  from  anything  happening  upon  the  said  lands  or  on 
account  of  the  condition  thereof. 

(6)  To  establish  and  carry  on  a  hotel  in  the  said  buildings 
or  any  of  them. 

(c)  To  purchase  or  acquire  by  means  of  the  trust  premises 
any  lands  adjoining  or  near  the  lands  specified  in  the  said 
schedule  hereto  and  any  personal  effects  which  they  may 
think  suitable  or  convenient  for  use  in  or  about  any  of  the 
said  buildings  or  in  connection  with  the  said  hotel. 

(d)  To  grant  or  create  any  easement  or  other  right  or 
privilege  over  or  in  relation  to  any  lands  and  hereditaments 
at  the  time  subject  to  any  of  the  trusts  hereof  and  to  pur- 
chase or  acquire  any  easement  or  other  right  or  privilege 
over  other  land  to  be  annexed  in  enjoyment  to  any  lands  and 
hereditaments  at  the  time  subject  to  any  of  the  trusts  hereof 
and  to  release  any  easement  or  restrictive  covenant  agree- 
ment or  provision  over  or  affecting  any  other  land  for  such 
consideration  and  upon  such  terms  as  the  Trustees  shall 
think  fit. 

(e)  To  grant  leases  at  will  or  for  any  term  of  years  in  pos- 
session or  reversion  and  to  make  allowances  to  and  arrange- 
ments with  tenants  and  others  and  to  accept  surrenders  of 
leases  and  tenancies. 

(/)  To  raise  or  secure  for  the  purposes  of  the  trusts  of 
these  presents  such  sums  of  money  as  they  shall  think  proper 

401 


APPENDIX  OF  FORMS 

and  to  mortgage  or  charge  the  whole  or  any  part  or  parts  of 
the  trust  premises  in  such  manner  and  on  such  terms  as  they 
shall  think  proper  for  securing  the  repaj^ment  of  any  moneys 
so  raised  or  secured  and  to  pay  off  or  enlarge  the  time  for 
pajnng  off  anj^  mortgage  or  charge  for  the  time  being  exist- 
ing or  to  make  a  new  mortgage  or  charge  for  an}^  sum  or 
sums  so  secured. 

(g)  To  sell  the  whole  or  any  part  of  the  trust  premises  in 
Vv'hatever  state  of  investment  the  same  may  be. 

(h)  To  invest  or  deal  with  the  moneys  forming  part  of 
the  trust  premises  upon  such  securities  or  in  such  manner  as 
may  from  time  to  time  be  determined  by  them. 

(i)  To  distribute  any  of  the  property  held  by  the  Trustees 
among  the  Shareholders  in  specie. 

(J)  To  cause  any  shares  bonds  or  securities  subject  to 
the  said  trusts  to  be  transferred  into  the  names  of  or 
vested  in  the  Trustees  or  any  of  them  jointly  with  the 
right  of  sur\'iyorship  or  in  any  one  of  them  in  such  man- 
ner as  not  to  give  notice  that  they  are  trustees  thereof  or 
that  the  same  are  affected  by  an}'  trust  or  to  allow  such 
shares  bonds  or  securities  to  remain  in  the  name  of  or  to  be 
transferred  into  the  name  of  any  other  person  firm  or  cor- 
poration and  to  entrust  to  any  incorporated  trust  com- 
pany- for  safe  keeping  any  or  all  of  the  bonds  certificates 
securities  and  documents  comprised  in  or  relating  to  the 
trust  premises. 

(k)  To  employ  such  agents  as  they  shall  think  proper  for 
the  management  repair  or  insurance  of  anj"  of  the  said 
property  or  in  conducting  the  business  of  the  said  trusts  and 
for  seeing  to  the  propriety  and  sufficiency  of  such  repairs 
and  insurance  without  the  Trustees  being  answerable  for 
the  acts  and  defaults  of  such  agents. 

(/)  To  settle  all  accounts  and  to  compound  compromise 
abandon  or  adjust  by  arbitration  or  otherwise  any  actions 
suits  proceedings  disputes  claims  demands  and  things  re- 
lating to  the  trust  premises  and  to  transfer  to  and  deposit 
with  any  incorporated  trust  company  or  other  persons  any 
shares  or  securities  forming  part  of  the  trust  premises  for 
the  purposes  of  any  arrangement  for  enforcing  or  protecting 
the  interests  of  the  Trustees  or  the  owners  of  such  shares  or 
securities  and  to  give  time  with  or  without  security  for  the 
payment  or  delivery  of  any  debts  or  property  and  to  execute 

402 


BLANK  HOTEL  TRUST 

and  enter  into  releases  agreements  and  other  instruments 
and  do  all  other  things  proper  for  any  such  purpose  to  pay 
or  satisfy  any  debts  or  claims  upon  any  evidence  that  they 
shall  think  sufficient. 

(?n)  To  enter  into  arrangements  expressed  in  writing  for 
any  of  the  purposes  hereinbefore  mentioned  that  the  pay- 
ment of  any  sum  of  money  or  the  performance  of  anything 
that  shall  have  been  agreed  upon  shall  be  a  floating  charge 
upon  the  real  and  personal  property  for  the  time  being  sub- 
ject to  the  trusts  of  these  presents  in  such  manner  that  the 
Trustees  notwithstanding  such  charge  may  continue  to  deal 
with  the  said  real  and  personal  property  by  way  of  sale 
mortgage  charge  lease  or  otherwise  or  paying  dividends  out 
of  profits  in  accordance  with  the  trust  hereof  and  that  the 
Trustees  shall  not  be  liable  for  the  payment  of  any  such  sum 
of  money  or  for  damages  for  non-performance  of  anything 
that  shall  have  been  agreed  upon  except  out  of  the  trust 
premises  so  far  as  the  same  shall  be  sufficient  for  the  purpose 
and  that  no  Trustee  shall  be  in  any  way  liable  in  respect 
thereof  after  he  ceases  to  be  a  trustee  of  these  presents  and 
every  such  floating  charge  shall  rank'pari  passu  with  every 
other  such  floating  charge  unless  otherwise  specially  agreed. 
And  any  agreement  entered  into  in  pursuance  of  these  pres- 
ents in  the  name  of Hotel  Trust  shall  without  any  ex- 
press provisions  to  that  effect  operate  as  an  arrangement 
with  the  Trustees  for  such  a  floating  charge  as  above  men- 
tioned and  words  may  be  added  to  any  document  containing 
or  relating  to  any  such  agreement  or  any  part  thereof  to  the 
effect  that  contracts  made  in  that  name  operate  as  a  floating 
charge  created  by  the  Trustees  upon  all  the  property  com- 
prised in  these  presents  as  herein  provided  and  that  the 
Trustees  are  not  liable  upon  any  such  contract  except  for 
the  application  of  such  property  in  accordance  with  the 
provisions  hereof  and  no  liability  attaches  to  the  Share- 
holders. 

(n)  Generally  in  all  matters  not  hereinbefore  specified  to 
deal  with  the  trust  premises  and  to  manage  and  conduct  the 
trusts  hereof  in  any  manner  that  they  shall  deem  for  the 
interest  of  the  Shareholders  as  fully  as  if  the  Trustees  were 
the  absolute  owners  of  the  trust  premises.  And  to  execute 
and  do  all  such  agreements  deeds  instruments  and  things  as 
they  shall  think  proper  for  executing  any  of  the  powers  or 

403 


APPENDIX  OF  FORMS 

trusts  contained  in  these  presents  and  to  authorize  the  exe- 
cution of  any  such  agreements  deeds  or  instruments  in  their 
names  by  any  of  their  officers  or  other  persons. 

2.  The  Trustees  shall  not  be  obliged  to  incur  any  personal 
liabiHty  in  the  execution  of  any  of  the  trusts  or  powers  herein 
contained  and  shall  not  have  any  power  or  authority  to 
borrow  money  or  incur  any  liability  on  the  credit  or  behalf 
of  the  Shareholders  or  to  make  any  contract  binding  them 
personally  or  be  entitled  to  look  to  the  Shareholders  for  in- 
demnity against  any  liability  incurred  by  the  Trustees  or 
any  of  them.  But  if  the  Trustees  or  any  of  them  shall  give 
their  or  his  personal  security  for  the  payment  of  any  money 
or  otherwise  incur  any  personal  liability  in  respect  of  the 
premises  such  Trustees  or  Trustee  shall  be  entitled  to  in- 
demnity out  of  the  property  for  the  time  being  comprised  in 
the  trust  premises  against  any  and  all  Habihty  arising  out 
of  the  same. 

3.  All  real  estate  at  any  time  vested  in  the  Trustees  for 
any  of  the  purposes  of  these  presents  shall  be  held  by  them 
upon  the  Hke  trust  for  sale  and  conversion  and  the  like  pow- 
ers and  provisions  in  respect  of  postponement  thereof  and 
the  application  of  the  rents  and  income  of  the  same  as  are 
herein  contained  concerning  the  real  estate  specified  in  the 
said  schedule  hereto. 

4.  In  making  any  sale  in  pursuance  of  any  of  the  powers  or 
trusts  herein  contained  the  Trustees  shall  have  power  to  sell 
by  public  auction  or  private  contract  and  to  buy  in  at  any 
sale  by  auction  or  rescind  or  vary  any  contract  of  sale  and 
to  resell  without  being  answerable  for  loss  and  for  the  said 
purposes  the  Trustees  may  do  and  execute  all  proper  deeds 
instruments  and  things. 

5.  When  any  trustee  is  absent  from  Massachusetts  New 
York  Connecticut  and  Rhode  Island  and  has  been  so  absent 
for  more  than  seven  days  or  is  unfit  or  incapable  to  act  in 
the  said  trusts  the  other  trustee  or  trustees  for  the  time  being 
of  these  presents  may  exercise  the  powers  and  authorities 
hereby  given  to  the  Trustees.  And  any  trustee  so  absent 
or  contemplating  such  absence  may  by  power  of  attorney  or 
otherwise  empower  any  other  trustee,  so  to  act  on  his  behalf 
and  to  use  his  name  for  execution  or  signature  of  documents 
for  the  purposes  of  the  said  trusts  without  being  responsible 
for  loss. 

404 


BLANK   HOTEL  TRUST 

6.  Any  trustee  may  retire  and  be  discharged  from  the  said 
trusts  by  deHvering  his  resignation  thereof  in  writing  under 
his  hand  acknowledged  in  the  manner  required  in  the  case 
of  a  deed  of  conveyance  of  land  to  any  other  trustee  for  the 
time  being  and  such  resignation  shall  be  effectual  and  com- 
plete only  upon  the  appointment  of  a  new  trustee  or  trustees 
in  his  place  and  meanwhile  he  shall  continue  to  act  as  such 
trustee. 

7.  If  any  trustee  for  the  time  being  of  these  presents  shall 
die  or  resign  or  be  removed  or  become  unfit  or  incapable  to 
act  in  the  said  trusts  it  shall  be  lawful  for  the  surviving  or 
continuing  trustees  or  trustee  for  the  time  being  (and  for 
this  purpose  any  retiring  trustee  shall  if  willing  to  act  in  the 
exercise  of  this  power  be  considered  a  continuing  trustee)  to 
appoint  by  writing  a  new  trustee  or  trustees  in  place  of 
the  trustee  or  trustees  so  dying  resigning  removed  or  be- 
coming unfit  or  incapable  to  act  as  aforesaid.  And  upon 
every  such  appointment  the  number  of  trustees  may  be 
increased  or  diminished  but  not  to  less  than  two.  And 
upon  every  such  appointment  such  instruments  shall  be 
executed  as  shall  be  necessary  or  convenient  for  vesting  the 
trust  premises  in  the  trustees  or  trustee  for  the  time  being 
or  for  providing  evidence  of  such  vesting  independently  of 
such  appointment. 

8.  The  Shareholders  shall  have  power  at  any  time  or  times 
to  increase  or  reduce  the  number  of  Trustees  (but  they  shall 
not  reduce  the  number  of  Trustees  to  less  than  three)  and  to 
accept  the  resignation  of  any  Trustee  and  to  appoint  any 
additional  Trustee  or  Trustees. 

9.  The  receipts  of  the  Trustees  or  either  or  any  of  them  or 
their  agents  in  that  behalf  for  moneys  or  things  paid  or  de- 
livered to  them  or  him  shall  be  effectual  discharges  to  the 
persons  paying  or  delivering  the  same  therefrom  and  from 
all  liability  to  see  to  the  application  thereof.  And  no  pur- 
chaser or  person  dealing  with  the  Trustees  shall  be  bound  to 
ascertain  or  inquire  whether  any  resolution  of  the  Sharehold- 
ers as  is  herein  required  or  provided  for  has  been  obtained  or 
passed  or  as  to  the  existence  or  occurrence  of  any  event  or 
purpose  in  or  for  which  a  sale  mortgage  pledge  or  charge  is 
herein  authorized  or  directed  or  otherwise  as  to  the  purpose 
or  regularity  of  any  of  the  acts  of  the  Trustees  purporting  to 
be  done  in  pursuance  of  any  of  the  provisions  or  powers 

405 


APPENDIX  OF   FORMS 

herein  contained  or  as  to  the  regularity  of  the  discharge 
resignation  or  appointment  of  any  Trustee  and  a  transfer  of 
the  trust  premises  or  any  part  thereof  executed  by  the 
Trustee  or  Trustees  in  whom  the  same  shall  be  vested  at  the 
time  of  any  such  discharge  resignation  or  appointment  for 
the  purpose  of  vesting  the  same  in  the  trustees  for  the  time 
being  of  these  presents  or  providmg  evidence  of  such  vest- 
ing independently  of  such  discharge  resignation  or  appoint- 
ment shall  as  to  the  property  comprised  in  such  transfer 
be  conclusive  evidence  in  favor  of  any  such  purchaser  or 
other  person  dealing  with  the  Trustees  of  the  matters  therein 
recited  relating  to  such  discharge  resignation  or  appoint- 
ment or  the  occasion  thereof  or  the  occasion  of  such  transfer. 
And  no  purchaser  or  person  dealing  with  any  Trustee  pur- 
porting to  act  during  the  absence  unfitness  or  incapacity  of 
any  other  Trustee  or  under  any  delegation  of  authority  from 
any  other  Trustee  shall  be  concerned  to  ascertain  or  inquire 
whether  an  occasion  exists  in  which  he  is  authorized  so  to 
act  or  in  which  such  delegation  is  permitted  or  whether  such 
delegated  authority  is  still  subsisting. 

10.  The  Trustees  shall  not  be  liable  for  anything  done  or 
omitted  by  them  in  good  faith  and  shall  be  answerable  and 
accountable  only  for  their  own  acts  receipts  neglects  and 
defaults  respectively  and  not  for  those  of  each  other  or  any 
agent  employed  by  them  nor  for  any  bank  trust  company 
broker  or  other  person  with  whom  or  into  whose  hands  any 
moneys  or  securities  may  be  deposited  or  come  nor  for  any 
defect  in  title  of  any  property  or  securities  acquired  nor  for 
any  loss  unless  it  shall  happen  through  their  own  default 
respectively.'  And  no  Trustee  however  appointed  shall  be 
obliged  to  give  any  bond  or  surety  or  other  security  for  the 
performance  of  any  of  his  duties  in  the  said  trusts. 

Duration  of  the  Trusts 

11.  The  trusts  contained  in  these  presents  shall  continue 
in  such  manner  that  the  Trustees  shall  have  all  the  powers 
and  discretions  expressed  to  be  given  to  them  respectively 
by  these  presents  and  that  no  Shareholder  shall  be  entitled 
to  put  an  end  to  the  same  or  to  require  a  division  of  the  trust 
pr(!mises  or  any  part  thereof  except  as  herein  provided  until 
the  expiration  of  seventy-five  years  from  the  date  hereof  or 

406 


BLANK   HOTEL  TRUST 

the  expiration  of  twenty-one  years  from  the  death  of  the 

last  survivor  of  the  said and  such  other  persons 

now  living  as  shall  hereafter  become  trustees  of  these 
presents  before  any  person  or  persons  not  now  living 
shall  have  become  the  only  trustee  or  trustees  thereof  or 
the  offices  of  trustees  thereof  shall  have  become  entirely 
vacant  whichever  of  the  said  periods  shall  first  expire  and 
at  the  expiration  of  the  time  so  limited  the  said  trusts  shall 
terminate. 

12.  Upon  the  termination  of  the  said  trusts  by  the  said 
limitation  or  under  the  provisions  hereinafter  contained 
the  Trustees  shall  sell  and  convert  into  money  the  whole  of 
the  trust  premises  and  shall  apportion  the  proceeds  thereof 
among  the  Shareholders  ratably  according  to  the  number  of 
the  said  shares  held  by  them  respectively  subject  to  the 
preferences  provided  for  the  holders  of  preferred  shares. 

Income 

13.  The  Trustees  shall  from  time  to  time  set  apart  out  of 
the  income  of  the  trust  premises  as  and  for  a  surplus  fund 
such  sums  if  any  as  they  may  think  proper.  And  the  said 
surplus  fund  shall  be  applicable  during  the  continuance  of 
the  said  trusts  to  any  purposes  to  which  money  forming 
part  of  the  capital  or  income  of  the  trust  premises  may  be 
applied  including  the  payment  of  future  dividends. 

14.  Out  of  the  residue  of  the  income  of  the  trust  premises 
and  of  such  part  or  parts  if  any  of  the  surplus  fund  as  the 
Trustees  may  think  proper  the  Trustees  may  declare  divi- 
dends among  the  Shareholders  according  to  the  number  of 
shares  held  by  them  and  the  priorities  attached  to  such 
shares  respectively  payable  at  such  times  as  may  be  fixed 
by  the  Trustees.  And  the  Trustees  shall  appropriate  suf- 
ficient sums  for  the  payment  of  the  dividends  so  declared 
and  shall  pay  the  said  dividends  to  the  Shareholders  at  the 
time  and  in  the  manner  so  appointed.  And  the  Shareholders 
shall  have  no  right  to  any  dividends  except  when  and  as  de- 
clared by  the  Trustees. 

15.  The  Trustees  may  determine  the  time  of  the  com- 
mencement of  the  financial  year  and  from  time  to  time 
change  the  same.  And  until  they  shall  change  the  same  the 
financial  year  shall  commence  on  the  1st  of  October  in  each 

407 


APPENDIX  OF  FORMS 

year.  In  case  the  Trustees  shall  change  the  time  of  the 
commencement  of  the  financial  year  and  for  the  period  pre- 
ceding the  first  financial  year  they  shall  make  proportionate 
adjustments  of  the  income  expenses  taxes  outgoings  and 
dividends  as  they  shall  consider  proper  on  account  of  the 
change.  And  taxes  assessed  on  or  after  the  1st  of  April  and 
before  the  1st  of  October  in  the  present  or  any  subsequent 
calendar  year  shall  for  the  purposes  of  these  presents  be 
treated  as  if  they  were  assessed  on  the  1st  of  October  so  far 
as  conveniently  practicable. 

Shares 

16.  The  beneficial  interest  of  the  Shareholders  in  the 
trust  premises  shall  be  divided  into  3500  preferred  shares 
of  the  nominal  value  of  $100  each  and  7000  common  shares 
of  the  nominal  value  of  $1  each  all  of  which  shall  be  issued 

by  the  Trustees  to  the  said 

fully  paid  up  for  the  property  so  transferred  by  them  to  the 
Trustees  or  intended  so  to  be  as  aforesaid. 

17.  The  holders  of  the  preferred  shares  shall  be  entitled 
to  dividends  out  of  the  income  of  the  said  trusts  at  the  rate 
of  7  (seven)  per  cent  per  annum  upon  the  nominal  value  of 
their  shares  from  the  date  hereof  during  the  continuance  of 
the  said  trusts  in  priority  to  the  holders  of  the  common  shares 
which  dividends  shall  be  cumulative  until  they  shall  have 
been  declared  and  paid  at  the  said  rate  for  the  whole  of  the 
said  period  and  the  preferred  shares  shall  not  entitle  the 
holders  thereof  to  any  further  dividends  out  of  the  income. 
And  the  Trustees  upon  declaring  any  dividend  upon  the 
preferred  shares  shall  appropriate  sufficient  funds  for  the 
payment  of  such  dividend  and  shall  pay  the  same  to  the 
preferred  shareholders  at  the  time  appointed. 

18.  The  rest  of  the  income  not  required  for  the  said  divi- 
dends upon  the  preferred  shares  shall  be  applicable  by  the 
Trustees  to  dividends  upon  the  common  shares.  And  the 
Trustees  may  declare  such  dividends  upon  the  common 
shares  out  of  the  income  at  any  time  when  a  dividend  or 
dividends  shall  have  been  declared  on  the  preferred  shares 
at  the  rate  of  7  (seven)  per  cent  down  to  that  time  and  paid 
to  holders  thereof  or  provided  for  by  the  appropriation  of 
sufficient  funds  for  that  purpose. 

408 


BLANK  HOTEL  TRUST 

19.  Upon  the  termination  of  the  said  trusts  the  preferred 
shareholders  shall  be  entitled  to  receive  out  of  the  proceeds 
of  the  trust  premises  the  sum  of  $100  (one  hundred  dollars) 
for  each  of  the  preferred  shares  together  with  any  unpaid 
dividends  to  which  they  would  be  entitled  if  the  said  trusts 
had  continued  down  to  the  completion  of  the  sale  of  the 
trust  premises  or  in  case  of  the  insufficiency  of  the  said  pro- 
ceeds for  such  payments  the  same  shall  be  apportioned 
ratably  among  the  preferred  shares.  And  any  surplus  of  the 
said  proceeds  shall  be  apportioned  among  the  holders  of  the 
common  shares  ratably  according  to  the  number  of  the  said 
shares  held  by  them  respectively. 

20,  New  shares  in  addition  to  those  above  mentioned 
may  be  issued  by  the  Trustees  with  the  sanction  of  a  resolu- 
tion of  the  holders  of  two  thirds  of  all  the  shares. 

21.  Such  new  shares  shall  be  of  the  same  nominal  value 
as  the  original  preferred  shares  and  may  in  accordance  with 
any  directions  given  by  the  Shareholders  in  any  such  resolu- 
tion or  if  no  such  directions  be  given  in  the  discretion  of  the 
Trustees  be  issued  as  preferred  or  common  shares  ranking 
pari  passu  with  any  of  the  preferred  or  common  shares  pre- 
viously issued  or  with  any  right  of  preference  as  to  dividend 
or  capital  or  both  or  with  any  other  special  privilege  or  ad- 
vantage or  with  any  deferred  rights  as  compared  with  any 
shares  previously  issued  or  then  about  to  be  issued. 

22,  All  new  shares  may  be  issued  either  for  money  or 
property  and  if  issued  for  money  may  be  issued  fully  paid 
up  upon  the  payment  to  the  Trustees  of  such  sum  as  they 
shall  determine.  And  if  any  new  shares  are  issued  for  the 
whole  or  any  part  of  the  price  agreed  upon  for  any  prop- 
erty they  may  be  issued  fully  paid  up  upon  the  transfer  of 
such  property  to  the  Trustees. 

23,  Any  new  shares  whether  issued  for  money  or  prop- 
erty may  be  issued  without  offering  the  same  to  the  exist- 
ing Shareholders  or  any  of  them. 

24.  A  register  or  registers  shall  be  kept  by  or  under  the 
direction  of  the  Trustees  which  shall  contain  the  names  and 
addresses  of  the  Shareholders  and  the  number  of  shares 
held  by  them  respectively  and  of  all  future  transfers  thereof. 
No  Shareholder  shall  be  entitled  to  have  any  notice  given 
to  him  as  herein  provided  until  he  has  given  his  address  to 
the  Trustees  to  be  entered  in  the  register. 

409 


APPENDIX   OF   FORMS 

25.  The  Trustees  shall  have  power  to  employ  some  in- 
corporated trust  compgmy  in  the  city  of  Boston  as  transfer 
agent  or  registrar  to  keep  the  said  registers  and  to  record 
therein  the  transfers  of  any  of  the  said  shares  and  to  register 
certificates  of  shares  issued  by  the  Trustees  to  the  persons 
entitled  to  the  same  after  any  transfers  of  such  shares  or 
otherwise.  And  the  remuneration  of  such  transfer  agent  or 
registrar  shall  be  allowed  as  part  of  the  expenses  incidental 
to  the  execution  of  the  said  trusts. 

26.  Everi'  Shareholder  shall  be  entitled  to  receive  from 
the  Trustees  a  certificate  signed  by  the  president  and  the 
secretary  or  an  assistant  secretary'  substantially  in  one  of 
the  forms  contained  in  the  Second  Schedule  hereto  speci- 
f}-ing  the  number  of  shares  held  by  him  with  such  descrip- 
tion if  any  as  may  be  necessarA-  to  distinguish  them  from 
other  shares  to  which  different  rights  are  attached  and  even,' 
certificate  of  shares  shall  be  registered  by  the  transfer  agent 
or  registrar  if  any  and  have  on  it  a  certificate  of  such  transfer 
agent  or  registrar  that  it  has  been  so  registered. 

27.  If  any  certificate  is  worn  out  or  defaced  the  Trustees 
may  upon  surrender  thereof  for  cancellation  issue  a  new 
certificate  in  place  thereof.  And  on  evidence  satisfactory^ 
to  the  Trustees  that  any  certificate  has  been  lost  or  destroyed 
and  on  such  terms  if  an}-  as  to  indemnity  and  otherwise  as 
they  shall  deem  proper  the  Trustees  may  issue  a  new  cer- 
tificate in  place  thereof. 

28.  Ever}'  transfer  of  an}*  share  (otherwise  than  by  opera- 
tion of  law)  shaU  be  in  writing  under  the  hand  of  the  trans- 
feror and  upon  dehver}-  thereof  with  the  existing  certificate 
for  such  share  to  the  Trustees  or  their,  transfer  agent  shall 
be  recorded  in  the  register  and  a  new  certificate  therefor 
shall  be  given  to  the  transferee  and  iu  case  of  a  transfer  of 
only  a  part  of  the  shares  mentioned  in  an}'  certificate  a  new 
certificate  for  the  residue  thereof  shall  be  given  to  the  trans- 
feror. UntU  the  transfer  shall  be  so  dehvered  and  recorded 
the  transferor  shall  be  deemed  to  be  the  holder  of  the  share 
or  shares  comprised  therein  for  aU  the  purposes  hereof  and  the 
Trustees  shall  not  be  affected  by  any  notice  of  the  transfer. 

29.  Any  person  becoming  entitled  to  any  share  in  conse- 
quence of  the  death  bankrupcty  or  insolvency  of  any  Share- 
holder or  in  any  way  other  than  by  a  transfer  in  accordance 

410 


BLANK   HOTEL   TRUST 

with  the  preceding  paragraph  shall  be  recorded  in  the  register 
as  the  holder  of  the  said  share  and  receive  a  new  certificate 
for  the  same  upon  production  of  the  proper  evidence  thereof 
and  delivery  of  the  existing  certificate  to  the  Trustees  or 
their  transfer  agent  or  registrar. 

30.  Shares  shall  be  personal  property  entitling  the  Share- 
holders only  to  the  rights  and  interests  in  the  granted  prem- 
ises set  forth  in  these  presents. 

31.  Two  or  more  persons  holding  any  share  shall  be  joint 
tenants  of  the  entire  interest  therein  and  no  entry  shall  be 
made  in  the  register  or  in  any  certificate  that  any  person 
is  entitled  to  any  future  limited  or  contingent  interest  in 
any  share.  But  any  person  registered  as  the  holder  of  any 
share  may  subject  to  the  provisions  hereinafter  contained 
be  described  therein  as  a  trustee  of  any  land  and  any  words 
may  be  added  to  the  description  to  identify  the  trust. 

32.  The  Trustees  shall  not  nor  shall  the  Shareholders  or 
any  transfer  agent  or  registrar  or  other  agent  of  the  Trustees 
be  bound  to  take  notice  or  be  affected  by  notice  of  any  trust 
whether  express  implied  or  constructive  or  any  charge  or 
equity  to  which  any  of  the  said  shares  or  the  interests  of  any 
of  the  Shareholders  in  the  trusts  of  these  presents  may  be 
subject  or  to  ascertain  or  inquire  whether  any  sale  or 
transfer  of  any  such  share  or  interest  by  any  such  Share- 
holder or  his  personal  representatives  is  authorized  by  such 
trust  charge  or  equity  or  to  recognize  any  person  as  having 
any  interest  therein  except  the  persons  registered  as  such 
Shareholders.  And  the  receipt  of  the  person  in  whose  name 
any  share  is  registered  or  if  such  share  is  registered  in  the 
names  of  more  than  one  person  the  receipt  of  any  one  of 
such  persons  shall  be  a  sufficient  discharge  for  all  dividends 
and  other  moneys  payable  in  respect  of  such  share  and  from 
all  liabihty  to  see  to  the  application  thereof. 

Share  Warrants 

33.  Upon  the  request  in  writing  of  the  person  registered 
as  the  holder  of  any  shares  and  upon  surrender  and  cancella- 
tion of  the  certificate  for  the  same  the  Trustees  shall  issue 
a  warrant  (hereinafter  called  a  share  warrant)  for  the  same 
number  of  shares  substantially  in  the  form  contained  in 
the  Second  Schedule  hereto  stating  that  the  bearer  is  en- 

411 


APPENDIX  OF  FORMS 

titled  to  the  shares  therein  specified  and  may  provide  by 
coupons  or  otherwise  for  the  pajinent  of  future  dividends 
on  such  shares. 

34.  Coupons  payable  to  bearer  of  such  number  as  the 
Trustees  shall  think  proper  shall  be  attached  to  share  war- 
rants pro\dding  for  the  pajTnent  of  dividends  upon  the 
shares  included  therein  and  the  Trustees  shall  provide  as 
they  see  fit  for  the  issue  of  fresh  coupons  to  the  bearers  for 
the  time  being  of  share  warrants  when  the  coupons  attached 
thereto  shall  have  been  exhausted. 

35.  The  surrender  and  cancellation  of  any  certificate  of 
shares  shall  be  entered  in  the  register  and  aU  share  warrants 
issued  and  all  coupons  attached  thereto  or  otherwise  issued 
shall  be  registered  by  the  transfer  agent  or  registrar  if  any 
and  every  share  warrant  shall  have  on  it  a  certificate  of 
such  agent  or  registrar  that  it  has  been  so  registered. 

36.  The  coupons  shall  bear  the  number  of  the  share  war- 
rant to  which  they  belong  and  shall  also  be  distinguished  by 
numbers  showing  their  place  respectively  in  the  series  of 
coupons  to  wliich  they  belong  but  they  shall  not  be  expressed 
to  be  payable  at  any  particular  time  and  shall  not  contain 
any  statement  as  to  the  amount  which  shall  be  payable. 

37.  "V\Tien  any  di\'idend  is  declared  upon  the  shares  in- 
cluded in  any  share  warrant  the  Trustees  shall  publish  an 
advertisement  in  one  daily  newspaper  pubhshed  in  Boston 
and  in  such  other  newspapers  if  any  as  they  shall  think  proper 
stating  the  amount  payable  on  each  share  and  the  time  and 
place  of  payment  and  the  serial  number  of  the  coupon  to 
be  presented.  And  any  person  presenting  and  dehvering 
up  a  coupon  of  that  number  at  the  place  specified  in  the 
coupon  or  in  the  advertisement  shall  be  entitled  to  receive 
the  dividend  so  declared  upon  the  shares  included  m  the 
share  warrant  to  which  the  coupon  belongs. 

38.  The  Trustees  shall  be  entitled  to  treat  the  bearer  of 
any  share  warrant  or  coupon  as  absolutely  entitled  to  the 
shares  or  dividend  therein  specified. 

39.  If  any  share  warrant  or  coupon  is  worn  out  or  defaced 
the  Trustees  may  upon  surrender  thereof  for  cancellation 
issue  a  now  one  in  its  place.  And  on  evidence  satisfactory 
to  the  Trustees  that  any  share  warrant  or  coupon  has  been 
lost  or  destroyed  and  on  such  terms  if  any  as  to  indemnity 

412 


BLANK  HOTEL  TRUST 

and  otherwise  as  they  shall  deem  proper  the  Trustees  may- 
issue  a  new  one  in  place  thereof. 

40.  A  person  shall  not  be  entitled  as  the  bearer  of  a  share 
warrant  to  attend  or  vote  or  exercise  any  of  the  rights  of 
a  shareholder  in  respect  thereof  at  a  meeting  of  the  Share- 
holders or  to  sign  any  request  for  any  such  meeting  unless 
three  days  at  least  before  the  day  of  the  meeting  in  the  former 
case  or  unless  before  the  delivery  of  the  request  in  the  latter 
case  the  share  warrant  shall  have  been  deposited  at  the 
office  where  the  register  of  the  Shareholders  is  kept  or  such 
other  place  as  the  Trustees  appoint  with  a  statement  in  writ- 
ing of  his  name  and  address  and  shall  remain  so  deposited 
until  after  the  meeting  and  for  this  purpose  the  name  of  only 
one  holder  of  a  share  warrant  shall  be  given  or  received. 

41.  The  person  so  depositing  any  share  warrant  shall 
receive  a  certificate  stating  his  name  and  address  and  the 
number  of  shares  included  in  such  share  warrant  and  such 
certificate  shall  entitle  him  to  attend  and  vote  in  person  or 
by  proxy  and  exercise  the  rights  of  a  shareholder  at  a  meet- 
ing in  the  same  way  as  if  he  were  a  registered  holder  of  the 
shares  specified  in  such  certificate.  And  upon  the  surren- 
der of  such  certificate  the  share  warrant  in  respect  of  which 
it  shall  have  been  given  shall  be  returned. 

42.  Holders  of  share  warrants  shall  not  be  entitled  to 
notice  of  any  meeting  of  the  Shareholders. 

43.  A  person  shall  not  be  entitled  as  bearer  of  a  share  war- 
rant to  exercise  any  of  the  rights  of  a  member  except  as 
hereinbefore  provided  without  producing  such  warrant  and 
stating  his  name  and  address  and  if  and  when  the  Trustees 
so  require  permitting  an  indorsement  to  be  made  thereon 
of  the  fact  date  purpose  and  consequence  of  its  production. 

44.  Subject  to  the  provisions  herein  contained  the  bearer 
of  a  share  warrant  shall  be  deemed  a  Shareholder  in  respect 
of  the  shares  specified  in  such  warrant  and  shall  have  all 
the  rights  of  a  Shareholder  in  connection  therewith. 

45.  The  bearer  of  a  share  warrant  upon  surrendering  it 
to  be  cancelled  with  a  request  in  writing  signed  by  him  in 
such  form  as  the  Trustees  require  that  he  be  registered  as  a 
Shareholder  in  respect  of  the  shares  included  in  such  war- 
rant and  stating  therein  his  name  and  address  shall  be 
entered  in  the  register  as  a  Shareholder  accordingly. 

413 


APPENDIX   OF   FORMS 

Meetings  of  the  Shareholders 

46.  An  annual  meeting  of  the  Shareholders  shall  be  held 
on  the  second  Tuesday  of  February  in  every  year  after  the 
present  year  at  such  time  and  place  in  the  city  of  Boston  as 
the  Trustees  shall  appoint  at  which  meeting  the  Trustees 
shall  lay  before  the  Shareholders  an  account  of  the  receipts 
and  expenditures  and  income  account  of  the  trusts  hereof 
from  the  foot  of  the  last  previous  account  down  to  the  end 
of  the  last  financial  year  preceding  such  meeting  and  a  re- 
port shall  be  laid  before  them  by  the  Trustee  whenever  they 
think  there  is  any  matter  of  special  interest  or  importance 
calling  for  such  report. 

47.  At  the  annual  meeting  the  accounts  may  be  approved 
after  such  consideration  as  the  Shareholders  think  proper 
and  any  other  business  may  be  considered  or  transacted 
that  shall  be  specified  in  the  notice  of  the  meeting. 

48.  The  Trustees  may  whenever  they  think  fit  and  shall 
upon  the  written  request  of  the  holders  of  one  quarter  of  all 
the  said  shares  at  the  time  outstanding  call  a  special  meet- 
ing of  the  Shareholders  in  the  city  of  Boston.  Every  such 
reciuest  shall  express  the  purpose  of  the  meeting  and  shall 
be  dehvered  to  the  Trustees  or  one  of  them  addressed  in  the 
words  ''To  the  Trustees  of  the  Blank  Hotel  Trust."  And 
in  case  the  Trustees  shall  refuse  or  neglect  for  seven  days 
after  the  request  shall  have  been  so  delivered  to  call  such 
special  meeting  to  be  held  within  twenty-one  daj^s  after 
the  delivery  of  the  request  the  same  may  be  called  by  the 
person  or  persons  signing  such  request  or  by  any  three  of 
them.  And  a  special  meeting  may  also  be  called  by  the 
holders  of  one  quarter  of  the  said  shares  whenever  the  ofl&ces 
of  the  Trustees  shall  be  entirely  vacant. 

49.  The  president  of  the  Trustees  shall  be  entitled  to  pre- 
side at  every  meeting  of  the  Shareholders  but  if  he  is  not 
present  at  the  commencement  of  the  meeting  or  being  present 
shall  not  be  willing  to  preside  the  Shareholders  present  shall 
choose  any  other  shareholder  to  preside  as  chairman  of 
such  meeting. 

50.  At  a  special  meeting  no  business  or  resolution  shall 
be  considered  or  passed  other  than  such  as  is  included  in 
the  purposes  for  which  the  meeting  is  called. 

414 


BLANK  HOTEL  TRUST 

51.  Notices  of  the  annual  meetings  and  of  special  meet- 
ings shall  be  given  in  writing  by  the  secretary  or  by  order 
of  the  Trustees  or  in  case  of  a  special  meeting  by  the  persons 
calling  the  same  to  each  of  the  Shareholders  as  hereinafter 
provided  and  if  any  share  warrants  have  been  issued  by 
advertisement  ten  days  at  least  before  such  meeting  and 
shall  specify  the  time  and  place  thereof  and  in  the  case  of  a 
special  meeting  the  purposes  thereof. 

52.  At  all  meetings  every  Shareholder  shall  have  one  vote 
for  every  share  held  by  him  of  the  nominal  value  of  SI 00 
(one  hundred  dollars)  and  fractional  votes  proportionately 
for  shares  held  by  him  of  a  less  nominal  value  and  may  vote 
either  in  person  or  by  proxy  appointed  by  writing  under 
the  hand  of  the  appointer  or  in  the  case  of  a  corporation 
under  its  seal  and  the  holders  of  a  majority  in  nominal 
value  of  all  the  shares  shall  constitute  a  quorum  for  the 
transaction  of  business. 

53.  For  the  purpose  of  determining  the  Shareholders 
who  are  entitled  to  vote  at  any  meeting  the  Trustees  may 
fix  a  day  not  more  than  twenty-one  days  before  the  day  of 
such  meeting  and  in  such  case  only  the  Shareholders  regis- 
tered on  such  day  shall  be  entitled  to  vote  at  such  meeting 
on  the  shares  included  in  such  certificate. 

54.  When  any  share  is  held  jointly  by  several  persons  any 
one  of  them  may  vote  at  any  meeting  in  person  or  by  proxy 
in  respect  of  such  share  but  if  more  than  one  of  them  shall 
be  present  at  such  meeting  in  person  or  by  proxy  no  vote 
shall  be  received  in  respect  of  such  share  unless  the  persons 
so  present  join  in  or  assent  to  such  vote. 

55.  If  the  holder  of  any  share  is  a  minor  or  a  person  of 
unsound  mind  or  subject  to  guardianship  or  to  the  legal 
control  of  any  other  person  as  regards  the  charge  or  manage- 
ment of  such  share  he  may  vote  by  his  guardian  or  such 
other  person  appointed  or  having  such  contiol  and  such  vote 
may  be  given  in  person  or  by  proxy. 

56.  If  at  the  expiration  of  half  an  hour  from  the  time  ap- 
pointed for  a  meeting  a  quorum  is  not  present  the  meeting 
shall  be  dissolved  if  called  at  the  request  of  Shareholders  or 
by  Shareholders  after  such  request  as  hereinbefore  provided 
but  in  other  cases  the  Shareholders  present  in  person  or  by 
proxy  shall  constitute  a  quorum  for  the  purpose  of  adjourn- 

415 


APPENDIX  OF   FORMS 

ing  the  meeting  but  not  for  the  transaction  of  any  other 
business. 

57.  Except  as  otherwise  herein  provided  any  resolution 
carried  by  majority  of  the  votes  given  at  any  meeting 
shall  be  binding  and  in'  case  of  an  equality  of  votes  the 
chairman  of  the  meeting  shall  have  an  additional  or  casting 
vote. 

58.  The  Shareholders  may  by  a  resolution  passed  by  the 
votes  of  the  holders  of  three  fourths  of  all  the  shares  remove 
any  Trustee  or  terminate  these  presents  at  an  earlier  time 
than  that  hereinbefore  limited  for  that  purpose  or  make 
any  alteration  in  the  terms  powers  and  provisions  herein 
contained  but  so  that  no  such  alteration  shall  affect  the  rela- 
tive rights  of  the  holders  of  the  preferred  and  of  the  common 
shares  though  it  may  provide  for  the  reduction  of  the  num- 
ber of  the  shares  of  any  class  and  so  that  no  alteration  shall 
affect  any  purchaser  or  person  dealing  with  the  Trustees 
except  so  far  as  he  shall  have  actual  notice  thereof  or  as  it 
shall  be  set  out  in  a  certificate  of  the  president  and  the  secre- 
tary or  assistant  secretary  recorded  in  the  registry  of  deeds 
for  the  county  of  Suffolk. 

59.  Every  notice  to  the  Shareholders  required  or  pro- 
vided for  in  these  presents  may  be  given  to  them  personally 
or  by  sending  it  to  them  through  the  post-office  in  a  pre- 
paid letter  addressed  to  each  of  them  respectively  at  his 
address  specified  in  the  register  and  posted  in  the  city  of 
Boston  and  shall  be  deemed  to  have  been  given  at  the  time 
when  it  is  so  posted.  But  in  respect  of  any  share  held  jointly 
by  several  persons  notice  so  given  to  whichever  of  them  is 
first  named  in  the  register  shall  be  sufficient  notice  to  all  of 
them.  And  any  notice  so  sent  to  the  registered  address  of 
any  shareholder  shall  be  deemed  to  have  been  duly  sent  in 
respect  of  any  such  share  whether  held  by  him  solely  or 
jointly  with  others  notwithstanding  he  be  then  deceased 
and  whether  the  Trustees  or  any  person  sending  such  notice 
have  knowledge  or  not  of  his  death  until  some  other  person 
or  persons  shall  be  registered  as  holders.  And  the  certifi- 
cate of  the  person  or  persons  giving  such  notice  shall  be 
sufficient  evidence  thereof  and  shall  protect  all  persons  act- 
ing in  good  faith  in  reliance  on  such  certificate.  Any 
notice  herein  required  to  be  given  by  advertisement  shall 
be  given  by  publishing  the  same  once  in  one  daily  news- 

410 


BLANK  HOTEL  TRUST 

paper  published  in  Boston  and  in  such  other  newspapers 
if  any  as  the  person  or  persons  giving  such  notice  shall 
think  proper. 

Proceedings  of  the  Trustees 

60.  The  Trustees  may  meet  together  for  the  transaction 
of  business  and  regulate  their  meetings  as  they  think  proper 
and  they  may  prescribe  the  times  and  places  of  regular 
meetings  of  the  Trustees  which  may  be  held  without  any 
further  notice  thereof.  The  Trustees  may  make  alter  and 
amend  by-laws  regulating  their  conduct  and  meetings  and 
the  management  of  the  undertaking  not  inconsistent  with 
the  terms  or  provisions  of  these  presents. 

61.  The  quorum  necessary  for  the  transaction  of  business 
at  a  meeting  of  the  Trustees  shall  be  three  Trustees  present 
personally  or  by  proxy  of  whom  at  least  two  shall  be  present 
personally.  Such  quorum  shall  have  full  power  to  exercise 
all  or  any  of  the  powers  authorities  and  discretions  for  the 
time  being  vested  in  the  Trustees. 

62.  The  president  of  two  Trustees  may  at  any  time  sum- 
mon a  special  meeting  of  the  Trustees  by  giving  to  each  of 
the  other  Trustees  three  days'  notice  of  such  meeting  and 
a  notice  thereof  sent  through  the  post-office  in  a  prepaid 
letter  addressed  to  any  Trustee  at  his  usual  address  and 
posted  in  the  city  of  Boston  on  the  fifth  or  any  earher  day 
before  such  meeting  shall  be  deemed  sufficient  notice  to 
such  Trustee  whether  the  same  shall  be  received  by  him  or 
not  and  in  computing  any  such  time  Sundays  and  holidays 
shall  be  included.  But  if  any  Trustee  shall  be  out  of  Massa- 
chusetts New  York  Connecticut  and  Rhode  Island  it 
shall  not  be  necessary  to  give  him  any  notice  of  such  meet- 
ing. And  any  Trustee  may  waive  notice  of  a  meeting  either 
before  or  after  such  meeting. 

63.  A  Trustee  may  from  time  to  time  in  writing  appoint 
another  Trustee  as  his  proxy  to  vote  at  any  meeting  of  the 
Trustees. 

64.  Questions  arising  at  any  meeting  of  the  Trustees  shall 
be  decided  by  a  majority  of  the  votes  of  the  Trustees  present 
personally  or  by  proxy  and  in  case  of  an  equahty  of  votes 
the  chairman  of  the  meeting  shall  have  a  second  or  casting 
vote. 

417 


APPENDIX  OF  FORMS 

65.  The  Trustees  from  time  to  time  shall  elect  a  president 
a  secretary  and  a  treasurer  who  may  or  may  not  be  elected 
from  among  the  Trustees  and  shall  have  such  authority  and 
perform  such  duties  as  may  from  time  to  time  be  deter- 
mined by  the  Trustees  and  any  two  or  more  of  the  said 
offices  may  be  held  by  the  same  person, 

66.  The  action  of  the  Trustees  in  respect  of  any  matter 
may  be  testified  by  a  resolution  passed  by  them  at  a  meet- 
ing or  by  a  writing  signed  by  a  majority  of  them. 

67.  A  resolution  in  writing  signed  by  a  majority  of  the 
Trustees  shall  be  as  valid  for  all  purposes  as  a  resolution 
passed  at  a  meeting  of  the  Trustees. 

68.  A  certificate  signed  by  the  president  or  secretary  shall 
in  favor  of  the  Trustees  and  all  other  persons  acting  in  good 
faith  in  reliance  thereon  be  conclusive  evidence  of  the  con- 
tents of  any  resolution  or  action  of  the  Trustees  and  of  all 
matters  in  such  certificate  contained  relating  to  the  same 
or  to  the  regularity  thereof  and  the  passage  of  such  resolu- 
tion or  the  taking  of  such  action  and  no  person  shall  be 
obliged  to  make  any  inquiry  as  to  any  of  the  said  matters 
or  as  to  the  election  or  appointment  of  any  person  acting 
as  a  Trustee  or  be  affected  by  actual  or  implied  notice  of 
any  irregularity  therein. 

69.  The  Trustees  shall  cause  to  be  kept  in  books  provided 
for  the  purpose  minutes  of  all  resolutions  and  proceedings 
of  the  Trustees  and  of  the  names  of  the  Trustees  present  at 
every  meeting  specifying  whether  they  were  present  in 
person  or  by  proxy  and  minutes  of  all  resolutions  and  pro- 
ceedings of  all  meetings  of  the  Shareholders.  And  such 
minutes  if  purporting  to  be  signed  by  the  president  or 
secretary  or  an  assistant  secretary  shall  be  evidence  of  the 
matters  therein  stated  and  of  the  regularity  of  the  meet- 
ing and  that  proper  notice  of  the  meeting  was  given  if  any 
was  required  in  favor  of  the  Trustees  and  all  persons  acting 
thereon  in  good  faith  of  all  such  matters  and  things  therein 
stated. 

Miscellaneous  Provisions 

70.  From  and  after  the  execution  of  these  presents  as  to 
any  und  all  of  the  real  estate  and  other  property  specified 

418 


BLANK   HOTEL  TRUST 

in  the  First  Schedule  hereto  that  may  not  have  been  effec- 
tually and  perfectly  vested  in  the  Trustees  as  hereinbefore 
provided  until  the  same  shall  have  been  so  vested  in  them 

the  said    shall  hold  the  same  upon  trust  for 

transfer  thereof  to  the  Trustees  in  such  manner  as  aforesaid 
and  subject  thereto  shall  hold  the  same  upon  the  trusts 
herein  contained  concerning  the  same  as  if  the  same  had 
been  so  transferred. 

71.  The  trusts  of  these  presents  may  be  collectively  desig- 
nated for  all  the  purposes  thereof  as  the  Blank  Hotel 
Trust  and  under  that  name  so  far  as  practicable  all  business 
shall  be  conducted  by  the  Trustees. 

72.  In  the  construction  of  these  presents  words  in  the 
singular  number  include  the  plural  number  and  vice  versa 
and  words  denoting  males  include  females  and  words  de- 
noting persons  include  firms  associations  and  corporations 
unless  a  contrary  intention  is  to  be  inferred  from  the  sub- 
ject matter  or  context.  And  all  the  trusts  powers  and  pro- 
visions herein  contained  shall  take  effect  and  be  construed 
according  to  the  law  of  Massachusetts. 

73.  The  headings  of  different  parts  of  these  presents  and 
the  marginal  notes  are  inserted  for  convenience  of  reference 
and  are  not  to  be  taken  to  be  any  part  of  these  presents  or 
to  control  or  affect  the  meaning  construction  or  effect  of 
the  same. 

74.  The  terms  and  provisions  of  these  presents  may  be 
amended  or  changed  in  any  manner  or  to  any  extent  with 
the  concurrence  in  writing  or  by  vote  at  a  meeting  of  the 
holders  of  three  fourths  in  nominal  value  of  all  the  shares 
then  outstanding  but  not  so  as  to  affect  the  validity  or  effect 
of  anything  previously  done  by  the  Trustees  or  Shareholders 
hereunder. 

In  witness  whereof  the  parties  hereto  have  set  their  hands 
and  seals  at  Boston  in  the  State  of  Massachusetts  the  day 
and  year  first  above  written. 

First  Schedule 
(omitted) 

419 


.APPENDIX  OF  FORMS 

Second  Schedule 

(1)  Form  of  Certificate  of  Shares 

Blank  Hotel  Trust 
No Shares. 

This  is  to  certify  that    is  the  holder 

of preferred  (or  common)  shares  full  paid  and 

non-assessable  in  the  Blank  Hotel  Trust   the   said   shares 
being  issued  received  and  held  under  and  subject  to  the 

p^o^^sions    of    the    indenture    dated   1912 

establishing  the  Blank  Hotel  Trust  which  is  deposited  with 
the  Blank  Trust  Company  in  Boston 

This  certificate  is  not  valid  unless  registered  by  the  transfer 
agent  and  the  shares  specified  herein  are  transferable  by 
^^Titing  signed  by  the  holder  and  registered  in  the  books  of 
the  Blank  HotelTrust. 

Witness  the  signatures  of  the  president  and  the  secretary  or 
assistant  secretary  of  the  Blank  Hotel  Trust  the 


President. 


Registered  Secretary. 

Blank  Trust  Company,  Transfer  Agent. 

By 

Assistant  Secretary. 


Transfer  Clerk. 

Form  of  Transfer  Indorsed  on  Certificate 
For  value  received  the  imdersigned  the  holder  of  the  pre- 
ferred   (or    common)    shares    in    the   Blank    Hotel    Trust 
specified  in  the  within  certificate  hereby  assigns  and  trans- 
fers unto of    the    said    shares 

mentioned  in  the  within  certificate. 

Dated 19.... 

Witness 

Notice 
Transfers  will  be  registered  and  new  certificates  issued  to  the 
transferees  upon  the  delivery  of  transfers  to  the  transfer  agent 
accompanied  by  this  certificate.  The  signature  on  the  transfer 
should  correspond  in  every  particular  wdth  the  name  of  the 
holder  as  written  in  the  certificate  without  enlargement  or  dim- 
inution or  other  change. 

420 


BLANK   HOTEL  TRUST 

(2)  Form  of  Share  Warrant 

Blank  Hotel  Trust 

No Shares. 

This  is  to  certify  that  the  bearer  of  this  warrant  is  entitled 

to fully  paid  up  preferred  (or  common)  shares 

in  the  Blank  Hotel  Trust  subject  to    the    provisions    of 

the  indenture  dated  1912  establishing  the 

Blank  Hotel  Trust  which  is  deposited  with  the  Blank  Trust 
Company  in  Boston. 

This  certificate  is  not  valid  unless  registered  by  the  transfer 
agent. 

Witness  the  signatures  of  the  president  and  the  secretary 
or  assistant  secretary  of  the  Blank  Hotel  Trust  the 

President. 

Secretary. 
Registered 

Blank  Trust  Company,  Transfer  Agent. 

By 

Assistant  Secretary. 

Transfer  Clerk. 

Form  of  Coupon 

Blank  Hotel  Trust 
Dividend  coupon  No 

On preferred  (or  common)  shares  of  Blank  Hotel 

Trust  included  in  the  share  warrant  numbered  as  below 
payable  at  a  time  and  place  to  be  fixed  by  advertisement. 

No 

Secretary. 


i 


421 


APPENDIX  OF   FORMS 

(3)  Form  of  Certificate  of  Deposit 

Blank  Hotel  Trust 
No 

This  is  to  certify  that has  in  accordance 

with  the  provisions  of  the  indenture  of  trust  by  which  the 
said  undertaking  was  estabhshed  deposited  the  undermen- 
tioned share  warrants  in  respect  of  which  he  is  entitled  to 
attend  the  meeting  of  the  shareholders  of  Blank  Hotel  Trust 
to  be  held  on  the 

No.  of  share  warrant  ....  shares  represented  ....  cou- 
pons attached  .... 

Witness  the  signature  of  the  secretary  or  assistant  secre- 
tary of  Blank  Hotel  Trust  the 


Secretary. 
Registered 

Blank  Trust  Company,  Transfer  Agent. 

By 

Assistant  Secretary. 


Transfer  Clerk. 

Mortgage  Bond 

$1000  No 

Blank  Hotel  Trust 

established  by  an  indenture  of  trust  dated  the  ....  of 

and  deposited  with  the  Blank  Trust  Company 

at  Boston. 

Be  it  knoAvn  that  the  Trustees  of  the  Blank  Hotel  Trust  above 
mentioned  for  value  received  promise  to  pay  to  the  bearer 
hereof  the  sum  of  one  thousand  dollars  out  of  the  real  and 
personal  property  for  the  time  being  subject  to  the  trusts 

of  the  said  indenture  on  the  1st  day  of 19.  .  .  with 

interest  at  the  rate  of  .  .  .  per  cent  per  annum  payable  semi- 
annually to  the  bearers  of  the  respective  interest  warrants 
therefor  hereto  annexed  upon  presentation  thereof  both 
princijjal  and  interest  being  payable  at  the  office  of  the  said 
Jilatik  Trust  Company.  And  so  that  the  payment  of  the 
said  principal  and  interest  shall  be  a  floating  charge  upon 

422 


BLANK  HOTEL  TRUST 

the  said  property  as  provided  in  the  said  indenture  and  the 
said  Trustees  and  the  Shareholders  in  the  said  trusts  or  any 
of  them  shall  not  be  personally  liable  for  such  payment. 

This  obligation  is  one  of  a  series  of  bonds  secured  by  a 
mortgage  dated  the day  of 1912  whereby 


This  obligation  is  valid  only  when  the  Blank  Trust  Com- 
pany has  indorsed  hereon  its  certificate  that  it  is  one  of  the 
bonds  specified  in  the  said  mortgage. 

In  witness  whereof  the  said  Trustees  have  hereto  set  their 
seals  using  for  that  purpose  the  same  seal  and  caused  these 
presents  to  be  signed  by  their  president  and  treasurer  the 
day  of 1912. 


President. 
Treasurer. 


(Interest  Warrant) 

(Certificate  of  the  Blank  Trust  Co.) 


423 


I 

NORTH  AMERICAN  COMPANIES 

Agreement  and  Declara.tion  of  Trust 

Agreement  made  at  Boston  in  the  Commonwealth  of 
Massachusetts  and  dated  May  fifth,  1915  by  and  between  D., 
T.  and  C.  parties  of  the  first  part,  W.  residing  at  B.  Massa- 
chusetts and  H.  residing  at  S.  JVIassachusetts  (who  and  their 
successors  are  hereinafter  collectively  called  the  Trustees) 
parties  of  the  second  part  and  the  Holders  from  time  to 
time  of  Certificates  for  Preferred  and  Common  Shares 
herein  provided  for  (hereinafter  called  the  Shareholders) 
parties  of  the  third  part. 

TMiereas  the  parties  of  the  first  part  have  entered  into 
an  agreement  in  writing  (hereinafter  called  the  Preliminary 
Agreement)  dated  May  fourth,  1915  agreeing  among  other 
things  respectively  to  sell,  assign,  transfer  and  deliver  unto 
the  Trustees  the  shares  of  stock  by  the  terms  hereof  sold, 
assigned,  transferred  and  delivered  unto  the  Trustees  upon 
receiving  from  the  Trustees  shares  issued  hereunder  to  the 
aggregate  amount  of  935300  Dollars  in  amount  or  par  value 
of  preferred  shares  and  558000  common  shares  without 
nominal  or  par  value  and  upon  the  execution  and  delivery 
by  the  Trustees  of  the  agreements  therein  referred  to.  Said 
Preliminary  Agreement  is  on  file  with  the  Trustees  and  this 
agreement  and  declaration  of  trust  is  expressly  made  in 
pursuance  thereof  subject  to  all  the  terms  thereof  and  the 
Shareholders  hereby  and  by  their  acceptance  of  shares  here- 
under expressly  assent  to  all  the  terms  thereof. 

Now  therefore  this  Agreement  Witnesseth 

1.  The  said  D.  has  sold,  assigned,  transferred  and  delivered 
and  Vjy  these  presents  docs  sell,  assign,  transfer  and  deliver 
unto  the  Trustees  and  their  successors  and  assigns  27853 
shares  of  the  common  capital  stock  of  the  C.  Company,  a 

424 


NORTH  AMERICAN  COMPANIES 

corporation  organized  and  existing  under  the  Laws  of  the 
Province  of  Quebec,  Dominion  of  Canada,  and  agrees  that 
he  will  sell,  assign,  transfer  and  deliver  unto  the  Trustees 
any  and  all  additional  shares  of  the  capital  stock  of  the  said 
company  which  may  at  any  time  hereafter  be  acquired  by 
him  upon  receiving  for  each  such  additional  share  one  pre- 
ferred share  issued  hereunder  and  the  Trustees  agree  to 
accept  upon  the  said  terms  such  additional  shares  as  he  may 
deliver  to  them  up  to  the  amount  of  stock  in  the  C. 
Company  now  outstanding.  The  said  T.  has  sold,  assigned, 
transferred  and  delivered  and  by  these  presents  does  sell, 
assign,  transfer  and  deliver  unto  the  Trustees  and  their  suc- 
cessors and  assigns  thirty-six  thousand  (36,000)  shares  of 
the  capital  stock  of  the  S.  Company,  a  corporation  organized 
and  existing  under  the  laws  of  the  State  of  New  York.  The 
said  C.  has  sold,  assigned,  transferred  and  delivered  and  by 
these  presents  does  sell,  assign,  transfer  and  deliver  unto 
the  Trustees  and  their  successors  and  assigns  (2500)  shares 
of  the  preferred  capital  stock  and  (3000)  shares  of  the  com- 
mon capital  stock  of  T.  Company,  a  corporation  organized 
and  existing  imder  the  laws  of  the  State  of  New  York,  and 
agrees  that  he  will  sell,  assign,  transfer  and  deliver  unto  the 
Trustees  all  additional  common  and  preferred  shares  of  the 
capital  stock  of  the  said  Company  which  may  at  any  time 
hereafter  be  acquired  by  him  upon  receiving  for  each  such 
additional  share  of  preferred  stock  one  preferred  share  issued 
hereunder  and  for  each  such  additional  share  of  common 
stock  one  common  share  issued  hereunder  and  the  Trustees 
agree  to  accept  upon  the  said  terms  such  additional  shares 
as  he  may  deliver  to  them  up  to  the  amoimt  of  stock  in  the 
T.  Company  now  outstanding, 

2.  In  consideration  of  the  aforesaid  assignments  and 
agreements  the  Trustees  (as  Trustees  and  not  individuals) 
will  forthwith  issue  and  deliver  to  the  parties  of  the  first  part 
935300  dollars  in  amount  or  par  value  of  the  preferred  shares 
and  558000  of  the  common  shares  herein  provided  to  be 
issued  by  them,  and  will  forthwith  execute  and  deliver  a 
contract  with  S.  Securities  Corporation  for  the  acquisition 
of  four  thousand  (4000)  additional  shares  of  S.  Company 
and  will  forthwith  enter  into  an  agreement  for  the  sale  to  the 
Syndicate  formed  as  set  forth  in  the  Preliminary  Agreement 
of  two  hundred  and  twenty  thousand  (220,000)  common 

425 


APPENDIX   OF   FORMS 

shares  to  be  issued  hereunder,  and  forthwith  execute  and 
deUver  an  option  agreement  for  the  issue  of  two  hundred 
and  twenty  thousand  (220,000)  additional  common  shares 
hereunder,  all  as  provided  for  in  the  Preliminary  Agreement. 

3.  The  Trustees  hereby  declare  and  agree  that  they  will 
hold  all  the  said  shares  of  stock  acquired  and  to  be  acquired 
by  them  and  all  other  property  which  they  may  acquire  as 
such  Trustees  (hereinafter  called  the  trust  estate)  in  trust, 
to  hold  and  manage  the  same  for  the  benefit  of  the  share- 
holders for  the  time  being  according  to  the  number  and  class 
of  shares  issued  and  held  by  them  respectively  and  with  and 
subject  to  the  powers  and  provisions  hereinafter  set  forth 
concerning  the  same. 

The  Trustees 

4.  The  Trustees  shall  hold  the  legal  title  to  the  trust 
estate  and  in  addition  to  the  other  rights,  privileges,  au- 
thority and  power  vested  in  them  by  law  and  hereby  con- 
ferred upon  them,  they  shall  have  power  subject  to  the  limi- 
tations and  conditions  of  these  presents; 

(a)  To  manage  and  control  the  trust  estate; 

(6)  To  transfer  and  to  sell,  lease,  dispose  of  or  otherwise 
turn  to  account  all  or  any  part  of  the  trust  estate  to  any  cor- 
poration, person  or  persons  upon  such  terms  as  the  Trustees 
may  determine  except  that  the  Trustee  shall  not  except 
upon  the  termination  6f  the  trust  hereby  created  in  the 
manner  hereinafter  provided  sell  or  dispose  of  any  shares  of 
the  C.  Company  nor  any  shares  of  the  S.  Company  nor  any 
shares  of  the  T.  Company,  nor  any  shares  of  any  corpora- 
tion of  whose  capital  stock  the  greater  part  is  or  shall  be 
held  by  the  trustees  without  the  assent  by  vote  of  the  holders 
of  a  majority  of  the  outstanding  shares  issued  hereunder 
given  at  a  regular  annual  meeting  or  at  a  special  meeting 
called  for  the  purpose  of  considering  the  sale  or  disposition 
of  such  shares; 

(c)  To  acquire  any  real  or  personal  property,  rights, 
franchises  or  privileges  which  they  may  think  suitable  or 
convenient  for  any  purposes  of  the  undertaking; 

(d)  To  vote  in  person  or  by  proxy  at  any  and  all  meetings 
general  or  special  of  stockholders  or  holders  of  other  securi- 
ties upon  all  shares  of  stock  or  other  securities  held  hereunder 

42G 


NORTH  AMERICAN   COMPANIES 

and  on  any  and  all  matters  coming  before  said  meetings, 
including  the  right  to  vote  in  favor  of  the  creation  of  any 
mortgage  lien  or  other  encumbrance  upon  any  of  the  prop- 
erty, real  or  personal,  of  any  or  all  of  the  corporations  any 
of  whose  shares  of  stock  may  at  the  time  be  comprised  in 
the  trust  estate,  and  the  right  to  vote  in  favor  of  consolidat- 
ing or  merging  any  of  the  corporations  any  of  whose  shares 
of  stock  may  be  comprised  in  the  trust  estate  with  any  other 
such  corporation  or  with  any  other  corporation,  and  the 
right  to  vote  in  favor  of  the  sale  or  lease  of  the  physical 
property,  real  or  personal,  or  any  part  thereof  of  any  such 
corporation  to  any  other  corporation  whatsoever  now  exist- 
ing or  hereafter  created  or  to  any  voluntary  association  or 
trustees  or  persons  having  lawful  power  to  acquire  or  to  be- 
come lessees  of  such  property,  and  the  right  to  vote  in  favor 
of  or  to  consent  to  any  proposition,  resolution  or  motion  to 
amend,  alter,  repeal  or  modify  any  of  the  provisions  of  the 
articles  of  association,  certificate  of  incorporation,  charter 
and  by-laws  of  any  corporation  any  of  whose  shares  of  stock 
may  be  comprised  in  the  trust  estate,  provided  however  that 
neither  the  right  hereunder  to  vote  in  favor  of  the  creation 
of  any  such  mortgage  lien  or  other  encumbrance,  nor  the 
right  to  vote  in  favor  of  any  such  consolidating  or  merging, 
nor  the  right  to  vote  in  favor  of  any  such  sale  or  lease,  nor 
the  right  to  vote  in  favor  of  or  to  consent  to  any  such  propo- 
sition, resolution  or  motion  to  amend,  alter,  repeal  or  modify 
any  of  the  provisions  of  the  articles  of  association,  certificate 
of  incorporation,  charter  or  by-laws  of  any  corporation  any 
of  whose  shares  of  stock  may  be  comprised  in  the  trust  estate 
shall  be  exercised  without  the  assent  by  vote  of  the  holders 
of  a  majority  of  the  outstanding  shares  issued  hereunder 
given  at  a  meeting  of  the  shareholders  and  in  case  of  any 
such  consolidation,  merger  or  sale  to  accept  and  receive  in 
payment  or  in  exchange  for  the  interest  of  the  trust  estate 
in  the  premises  howsoever  represented  the  evidences  of  debt, 
bonds,  notes,  shares  of  stock,  participation  shares,  trust  cer- 
tificates, certificates  of  interest  or  other  security  made  or 
issued  by  one  or  more  corporations,  voluntary  associations, 
trustees  or  persons  as  the  Trustees  may  in  their  absolute 
and  uncontrolled  discretion  deem  to  be  proper; 

(e)  To  transfer  to  any  person  or  persons  any  share  or 
shares  of  stock  in  any  corporation  that  may  at  the  time  con- 

427 


APPENDIX  OF   FORMS 

stitute  a  part  of  the  trust  estate,  and  to  allow  any  such  share 
or  shares  of  stock  to  stand  in  the  name  or  names  of  such  per- 
sons as  long  as  the  Trustees  shall  thmk  proper  for  the  pur- 
pose of  qualifying  such  person  or  persons  as  a  director  or 
directors  or  other  officer  of  such  corporation  or  otherwise  for 
the  purpose  of  maintaining  the  organization  of  such  cor- 
poration, or  for  any  other  purpose  deemed  expedient  by  the 
Trustees; 

(/)  To  cause  any  shares,  bonds  or  securities  at  the  time 
forming  any  part  of  the  trust  estate  to  be  transferred  into 
the  names  of  or  vested  in  the  Trustees  or  any  of  them 
jointly  with  the  right  of  sur^^vorship  or  in  anj"  one  of  them 
in  such  manner  as  not  to  give  notice  that  they  are  Trustees 
thereof  or  that  the  same  are  affected  by  any  trust,  or  to 
aUow  or  cause  such  shares,  bonds  or  securities  to  remain  in 
or  to  be  transferred  to  the  name  or  names  of  any  other  per- 
son, firm  or  corporation  and  to  entrust  to  any  bank  or  trust 
company  or  safe  deposit  company  for  safe  keeping  any  or 
aU  of  the  certificates  of  stock,  bonds,  securities,  claims  and 
aU  documents  and  papers  comprised  in  or  relating  to  the 
trust  estate; 

(g)  To  sell  or  exchange  subject  to  the  Kmitations  in  (b) 
above  on  such  terms  and  for  such  considerations  whether 
cash  or  other  securities  as  they  may  see  fit,  bonds,  securities 
and  other  claims  held  by  them  of  or  against  any  corpora- 
tion, for  such  bonds,  notes,  shares  of  stock,  participation 
shares,  trust  certificates,  certificates  of  interest  or  other 
securities  made  or  issued  by  one  or  more  corporations, 
voluntarj^  associations,  trustees  or  persons  as  the  Trustees 
may  in  their  absolute  and  uncontrolled  discretion  deem  to 
be  proper; 

(h)  To  settle  all  accounts,  and  to  compound,  compromise, 
abandon  or  adjust  by  arbitration  or  otherwise  any  suits, 
actions,  proceedings,  cUsputes,  claims,  demands  and  things 
relating  to  the  trust  estate,  and  to  transfer  to  and  deposit 
with  any  incorporated  trust  company  or  other  persons  any 
shares  or  securities  forming  part  of  the  trust  estate  for  the 
purposes  of  any  arrangement  for  enforcing  or  protecting  the 
interests  of  the  Trustees  or  the  owners  of  such  shares  or 
securities  and  to  give  time  with  or  without  security  for  the 
payment  or  delivery  of  any  debts  or  property  claimed  in 
favor  of  the  trust  estate,  and  to  pay  or  satisfy  any  debts 

428 


NORTH  AMERICAN  COMPANIES 

or  claims  upon  any  evidence  that  the  Trustees  may  deem 
sufficient; 

(i)  To  lend  any  money  forming  part  of  the  trust  estate 
from  time  to  time  on  such  terms  and  conditions  and  with  or 
without  security  to  any  of  the  corporations  of  whose  capital 
stock  the  greater  part  is  or  shall  be  held  by  the  Trustees  or  to 
such  persons  or  other  corporations  as  the  Trustees  may  ap- 
prove, and  to  sell  or  otherwise  dispose  of  and  to  pledge  or 
hypothecate  any  bonds,  notes  or  other  evidences  of  indebted- 
ness given  for  or  on  account  of  any  such  loans  and  to  pay, 
liquidate,  settle  or  discharge  any  debts,  claims  or  demands  of 
any  sort  now  or  hereafter  existing  against  any  corporation  of 
whose  capital  stock  the  greater  part  is  or  shall  be  held  by 
the  Trustees; 

(j)  To  invest  or  deal  with  the  moneys  forming  part  of 
the  trust  estate  upon  such  securities  or  in  such  manner  as 
they  may  from  time  to  time  determine  in  the  same  manner 
and  to  the  same  extent  as  if  they  were  not  Trustees  but  were 
making  such  investments  as  natural  persons  and  without  any 
limitation  in  respect  of  the  character  of  the  securities  in- 
vested in,  and  to  sell  or  otherwise  dispose  of  any  of  such 
investments  and  reinvest  the  proceeds  thereof,  or  any  part 
thereof,  with  continuing  power  so  to  invest  and  reinvest 
during  the  existence  of  the  trust  hereby  created; 

(k)  By  unanimous  action  of  the  Trustees  to  raise  or  secure 
the  payment  of  money  from  time  to  time  for  the  purposes 
of  the  said  trusts  and  to  issue  evidences  thereof,  and  for  such 
purpose  to  mortgage,  pledge  or  otherwise  encumber  the 
whole  or  any  part  of  the  trust  estate  all  upon  such  terms  and 
conditions  and  for  such  purposes  and  in  such  manner  as 
they  may  determine; 

(l)  To  deposit  any  moneys,  included  in  or  derived  from 
the  trust  estate,  in  any  bank  or  trust  company,  and  from 
time  to  time  to  provide  for  the  disbursement  thereof; 

(m)  To  pay  any  and  all  taxes  or  liens  of  whatsoever  na- 
ture or  kind  imposed  upon  or  against  the  trust  estate,  or 
any  part  thereof,  out  of  any  funds  available  for  such  pur- 
pose; 

(n)  To  buy  or  join  with  any  person  or  persons  in  buying 
the  property  of  any  corporation,  any  of  the  securities  of 
which  are  included  in  the  trust  estate,  or  any  property  in 
which  the  Trustees  as  such  shall  have  or  may  hereafter  ac- 

.429 


APPENDIX  OF  FORMS 

quire  an  interest  and  to  allow  the  title  to  any  property  so 
bought  to  be  taken  in  the  name  or  names  of  and  to  be  held 
by  such  person  or  persons  as  the  Trustees  shall  name  or 
approve  and  so  that  all  real  estate  so  acquired  and  in  what- 
soever name  held  shall  be  held  upon  trust  for  sale  and  con- 
version into  personal  estate  at  such  time  or  times  and  in 
such  manner  and  upon  such  terms  as  they  shall  think  fit 
but  all  such  real  estate  shall  at  all  times  during  anj^  post- 
ponement of  the  sale  and  conversion  thereof,  be  considered 
as  personal  estate; 

(o)  To  enter  into  any  and  all  contracts,  guaranties,  obUga- 
tions  and  other  instruments  which  in  the  opinion  of  the 
Trustees  may  be  necessary  or  expedient  to  carrj^  out,  pro- 
mote, protect  and  conserve  the  trust  hereby  created  and 
the  interests  of  the  shareholders,  including  the  making  of 
guaranties  to  secure  the  performance  of  contracts  and  obhga- 
tions  of  other  parties; 

(p)  Generally  in  all  matters,  to  deal  with  the  trust  estate 
and  to  manage  and  conduct  the  affairs  thereof  as  fully  as  if 
the  Trustees  were  the  absolute  owners  of  the  trust  estate, 
and  to  execute  and  make  and  do  all  such  agreements,  deeds, 
instruments  and  things  as  the  Trustees  may  deem  proper 
for  any  of  the  said  purposes; 

(q)  At  any  time  and  from  time  to  time  to  vest  in  and  dele- 
gate to  an  executive  committee  any  powers  and  authorities 
conferred  upon  the  Trustees  by  these  presents  and  to  alter, 
modify  or  revoke  any  such  grant  or  delegation  at  discre- 
tion. 

5.  The  Trustees  shall  not  have  any  power  or  authority 
to  borrow  money  on  the  credit  or  on  behalf  of  the  Share- 
holders or  to  make  anj^  contract  on  their  behalf  for  repay- 
ment of  any  money  raised  by  mortgage,  pledge  or  charge 
in  pursuance  of  the  provisions  hereof  or  to  make  any  con- 
tract or  incur  any  liability  whatever  on  behalf  of  the  Share- 
holders or  binding  them  personally. 

6.  The  management  of  the  property  and  affairs  of  the 
trust  estate  may  be  carried  on  by  the  Trustees  under  the 
name  of  the  North  American  Companies  and  the  trusts 
herel)y  created  and  the  Trustees  in  their  collective  capacity 
may  also  be  designated  as  the  North  American  Companies. 
In  all  written  contracts  and  obligations  it  shall  be  the  duty 
of  the  Trustees  or  other  officers  or  agents  especially  to  stipu- 

430 


NORTH  AMERICAN   COMPANIES 

late  that  neither  the  Shareholders  nor  the  Trustees  nor  any 
officers  of  the  trust  shall  be  held  to  any  personal  liability 
under  or  by  reason  of  the  same. 

7.  The  Trustees  may  appoint  a  President,  one  or  more 
Vice-Presidents,  a  Secretary,  a  Treasurer  and  such  other 
officers  and  agents  as  they  shall  think  proper  for  the  manage- 
ment of  the  property  and  affairs  of  the  trust  estate  and 
assign  to  them  from  time  to  time  such  duties  as  they  shall 
think  fit  without  being  answerable  for  the  acts  or  defaults 
of  such  officers  or  agents.  The  Trustees  may  delegate  any 
of  their  powers  to  an  executive  committee  but  such  com- 
mittee shall  in  the  exercise  of  any  power  so  delegated  con- 
form to  any  regulations  that  may  from  time  to  time  be  im- 
posed by  the  Trustees.  None  of  the  said  officers  or  agents 
or  members  of  the  executive  committee  need  be  Trustees. 
The  Trustees  may  fix  and  pay  out  of  the  trust  estate  the 
compensation  of  the  officers,  agents  and  members  of  the 
executive  committee  appointed  by  them  and  if  any  Trustee 
shall  act  as  an  officer,  agent  or  member  of  the  executive 
committee  he  may  receive  compensation  for  so  acting  in 
addition  to  that  received  by  him  as  Trustee. 

8.  The  Trustees  may  act  with  or  without  a  meeting  and 
the  action  of  a  majority  of  the  Trustees  except  as  provided 
in  (k)  above  shall  be  valid  and  binding.  Any  Trustee  may 
appoint  any  other  Trustee  as  his  proxy  to  act  for  him  at 
any  meeting  and  may  empower  any  other  Trustee  to  act 
on  his  behalf  and  to  use  his  name  for  execution  or  signa- 
ture of  documents  for  the  purposes  of  these  presents  without 
being  responsible  for  loss. 

9.  Out  of  the  income  from  the  trust  estate  the  Trustees 
may  make  distributions  under  the  name  of  dividends  or 
otherwise  among  the  Shareholders  as  hereinafter  provided 
at  such  times  as  the  Trustees  may  fix,  and  the  Shareholders 
shall  have  no  right  to  any  distributions  except  when  and  as 
declared  by  the  Trustees. 

10.  The  Trustees  shall  be  entitled  to  remuneration  the 
amount  of  which  shall  from  time  to  time  be  fixed  by  vote 
of  the  Shareholders,  and  shall  be  paid  out  of  the  trust  es- 
tate. 

11.  The  Trustees  shall  pay  out  of  the  trust  estate  the  ex- 
penses of  the  preparation  of  this  agreement  and  the  forma- 

431 


APPENDIX  OF  FORMS 

tion  of  the  trust  hereby  created  and  the  agreements  pursuant 
to  which  this  agreement  and  declaration  of  trust  is  executed 
as  referred  to  herein  and  of  printing  and  engraving  or 
lithographing  the  certificates  for  shares  to  be  issued  here- 
under and  other  expenses  of  hke  nature  in  connection  with 
the  formation  of  the  trust  hereby  created. 

12.  Every  Trustee  may  purchase  or  acquire  shares  in  all 
respects  as  if  he  were  not  a  Trustee.  No  Trustee  shall  be 
disqualified  by  his  office  from  contracting  with  the  Trus- 
tees either  as  vendor,  purchaser  or  otherwise,  nor  shall  any 
such  contract  or  arrangement  in  which  any  Trustee  shall 
be  in  any  way  interested  be  avoided,  nor  shall  any  Trustee 
so  contracting  or  being  so  interested  be  liable  to  account  for 
the  profit  reahzed  by  any  such  contract  or  arrangement 
by  reason  of  such  Trustee  holding  office  or  of  the  fiduciary 
relation  thereby  estabhshed,  but  the  nature  of  his  interest 
must  be  disclosed  by  him  to  the  other  Trustees  before  the 
contract  or  arrangement  is  determined  on  if  his  interest  then 
exists  and  no  Trustee  shall  vote  in  respect  of  any  contract 
or  arrangement  in  which  he  is  interested  as  aforesaid  but 
this  prohibition  shall  not  apply  to  any  resolution  to  give  the 
Trustees  or  any  of  them  any  remuneration  or  security  by 
way  of  indemnity  and  it  may  at  any  time  or  times  be  sus- 
pended or  relaxed  to  any  extent  by  vote  of  the  Shareholders. 

13.  Except  in  the  case  of  death,  resignation  or  disability 
the  Trustees  to  whom  the  trust  estate  is  granted  by  these 
presents  shall  continue  to  be  Trustees  hereof  until  the  first 
annual  meeting  of  the  Shareholders  at  which  time  an  equal 
number  of  Trustees  or  in  the  event  that  such  number  shall 
have  been  increased  by  the  Trustees  or  shall  be  increased  by 
the  Shareholders  then  such  increased  number  shall  be 
elected  by  the  Shareholders.  The  Trustees  may  at  any  time 
and  from  time  to  time  until  the  first  annual  meeting  of  the 
Shareholders  increase  the  number  of  Trustees  hereunder 
but  not  to  a  number  exceeding  nine  (9)  and  may  fill  any 
vacancy  caused  by  such  increase  and  the  Shareholders  may 
at  any  armual  meeting  fix  the  number  of  Trustees  hereunder 
but  such  number  shall  not  be  less  than  three  (3)  and  shall 
not  exceed  nine  (9).  The  Trustees  elected  at  any  annual 
meeting  shall  hold  office  until  the  next  annual  meeting  there- 
after and  until  tlieir  successors  have  been  elected  and  have 
agreed  to  act.    Failure  to  hold  an  annual  meeting  or  elect 

432 


NORTH  AMERICAN  COMPANIES 

Trustees  shall  not  cause  any  vacancy  among  the  Trustees 
or  in  any  way  affect  the  trust  hereby  created.  The  Trus- 
tees shall  have  power  at  any  time  or  times  to  accept  the  res- 
ignation of  any  Trustee  and  fill  any  vacancy  caused  by 
resignation  or  otherwise. 

14.  Any  Trustee  may  retire  by  presenting  his  resignation 
in  writing  to  some  one  or  more  of  the  Trustees  but  such 
resignation  shall  be  effectual  and  complete  only  upon  the 
appointment  of  a  new  Trustee  in  his  place  or  the  previous 
acceptance  of  his  resignation  by  the  remaining  Trustees  or 
upon  the  expiration  of  six  calendar  months  after  such  resig- 
nation and  meanwhile  he  shall  continue  to  act  as  such 
Trustee. 

15.  Upon  the  resignation  of  any  Trustee  and  upon  every 
appointment  of  a  new  Trustee  such  instruments  shall  be 
executed  as  shall  be  necessary  or  convenient  for  vesting 
the  trust  estate  in  the  Trustees  for  the  time  being  or 
providing  evidence  of  such  vesting  independently  of 
such  resignation  or  appointment,  all  of  which  instru- 
ments the  Trustees  for  the  time  being  are  hereby  author- 
ized to  execute.  The  Trustees  for  the^  time  being  may 
exercise  all  the  powers,  authorities  and  discretions  hereby 
given  to  the  Trustees  notwithstanding  any  vacancy  among 
the  Trustees. 

16.  The  receipts  of  the  Trustees  or  either  of  them  or  any 
of  them  or  of  the  Treasurer  or  other  officer  or  agent  there- 
unto authorized  by  the  Trustees  for  money  or  things  paid 
or  delivered  to  them  or  him  shall  be  an  effectual  discharge 
to  the  persons  paying  or  delivering  the  same  therefrom  and 
from  all  liability  to  see  to  the  application  thereof.  No 
purchaser  or  person  dealing  with  the  Trustees  shall  be 
bound  to  ascertain  or  inquire  as  to  the  existence  or  occur- 
rence of  an}'-  event  or  purpose  in  or  for  which  a  sale,  mort- 
gage, pledge  or  charge  is  herein  authorized  or  directed,  or 
otherwise  as  to  the  purpose  or  regularity  of  any  of  the  acts 
of  the  Trustees  purporting  to  be  done  in  pursuance  of  any 
of  the  provisions  or  powers  herein  contained  or  as  to  the 
regularity  of  the  discharge,  resignation  or  appointment  of 
any  Trustee;  and  a  transfer  of  the  trust  premises  or  any 
part  thereof  executed  by  the  Trustee  or  Trustees  in  whom 
the  same  shall  be  vested  at  the  time  of  any  such  discharge, 

433 


APPENDIX   OF   FORMS 

resignation  or  appointment  for  the  purpose  of  vesting  the 
same  in  the  Trustees  for  the  time  being  of  these  presents  or 
providing  evidence  of  such  vesting  independently  of  such 
discharge,  resignation  or  appointment,  shall  as  to  the  prop- 
erty comprised  in  such  transfer  be  conclusive  evidence  in 
favor  of  any  such  purchaser  or  other  person  dealing  with 
the  Trustees  as  to  the  matters  therein  recited  relating  to 
such  discharge,  resignation  or  appointment  or  the  occasion 
thereof  or  the  occasion  of  such  transfer.  No  purchaser  or 
person  dealing  with  any  Trustee  purporting  to  act  during 
the  absence  of  any  other  Trustee  or  under  any  delegation 
of  authority  from  any  other  Trustee  shall  be  concerned  to 
ascertain  or  inquire  whether  an  occasion  exists  in  which  he 
is  authorized  so  to  act  or  in  which  such  delegation  is  per- 
mitted or  whether  such  delegated  authority  is  still  subsist- 
ing. 

17.  No  corporation,  company  or  body  politic  shall  be 
affected  by  notice  that  any  of  its  shares  or  bonds  or  other 
securities  are  subject  to  these  presents  or  be  bound  to  see  to 
the  execution  of  any  of  the  trusts  hereunder  or  to  ascertain 
or  inquire  whether  any  transfer  of  any  such  shares,  bonds 
or  securities  by  the  Trustees  is  authorized  notwithstanding 
such  authority  may  be  disputed  by  some  other  person. 

18.  No  Trustee  or  member  of  any  committee  appointed 
by  the  Trustees  shall  be  liable  for  anything  done  or  omitted 
by  him  in  good  faith  and  each  shall  be  answerable  and 
accountable  only  for  his  own  acts,  receipts,  neglects  and 
defaults  respectively  and  not  for  those  of  any  other  nor  of 
any  agent  employed  by  them  nor  of  any  bank,  trust  com- 
pany, broker  or  other  person  with  whom  or  into  whose 
hands  any  part  of  the  trust  estate  may  be  deposited  or  come, 
nor  for  any  defect  in  title  or  lack  of  genuineness  or  invahdity 
of  the  shares  of  stocks,  bonds,  notes,  obligations  or  other 
properties  or  securities  at  any  time  included  in  the  trust 
estate,  nor  for  any  loss,  unless  it  shall  happen  through  his  or 
its  ONVTi  wilful  default  respectively.  No  Trustee  however 
appointed  shall  be  obliged  to  give  any  bond  or  surety  or 
other  security  for  the  performance  of  any  of  his  duties  in 
the  said  trust. 

19.  Each  Trustee  and  each  member  of  any  committee 
appointetl  by  the  Trustees  and  each  officer,  agent  and  other 

434 


NORTH  AMERICAN  COMPANIES 

representative  appointed  pursuant  to  any  provision  hereof 
shall  be  entitled  to  indemnity  out  of  the  trust  estate  against 
any  and  all  loss  and  liability  incurred  by  him  or  them  or 
any  of  them  in  the  execution  of  the  trust  hereby  created. 
But  the  Trustees  or  any  of  them  or  any  member  of  any  com- 
mittee or  officer,  agent  or  representative  appointed  hereunder 
shall  not  be  entitled  to  look  to  the  Shareholders  personally 
for  indemnity  against  any  loss  or  liability  incurred  by  him 
or  them  or  any  of  them  in  the  execution  hereof  or  to  call 
upon  the  Shareholders  for  the  payment  of  any  sum  of  money 
or  any  assessment  whatever. 

20:  In  case  the  Trustees  shall  acquire  any  interest  in  real 
estate  as  proceeds  or  income  of  the  trust  estate  they  shall 
hold  the  same  upon  trust  for  sale  and  conversion  into  per- 
sonal estate  at  such  time  or  times  and  in  such  manner  and 
upon  such  terms  as  they  shall  approve  and  they  shall  have 
the  power  to  postpone  such  conversion  so  long  as  they  in 
their  uncontrolled  discretion  shall  think  fit  but  all  such  real 
estate  shall  at  all  times  during  any  postponement  of  the  sale 
and  conversion  thereof  be  considered  as  personal  estate  sub- 
ject to  the  terms  hereof  and  at  all  times  and  to  the  full  ex- 
tent permitted  by  law  all  such  real  estate  shall  be  consid- 
ered and  treated  as  personal  property  for  the  purposes  of  the 
trust  hereby  created. 

Shares  and  Shareholders 

21.  The  beneficial  interest  in  the  trust  estate  shall  be  di- 
vided into  twenty  thousand  (20,000)  preferred  shares  ex- 
pressed to  be  of  the  amount  or  par  value  of  one  hundred 
dollars  ($100)  each  and  one  million  (1,000,000)  com- 
mon shares  without  expressed  amount  or  par  value. 
All  such  shares  shall  be  personal  property,  shall  be 
assignable  and  transferable  in  the  manner  herein  pro- 
vided and  shall  entitle  the  holders  thereof  only  to  such 
rights  and  interests  in  the  trust  estate  as  are  set  forth 
in  these  presents. 

22.  The  said  twenty  thousand  (20,000)  preferred  shares 
of  the  amount  or  par  value  of  two  million  dollars  ($2,000,- 
000)  and  five  hundred  and  sixty  thousand  (560,000)  of  the 
common  shares  shall  be  reserved  to  be  issued  by  the  Trus- 
tees only  for  the  acquisition  by  them  of  shares  of  stock  in 

435 


APPENDIX  OF   FORMS 

the  C.  Company,  the  S.  Company  and  the  T.  Company. 
In  the  first  instance  the  Trustees  shall  issue  for  tne  purposes 
set  forth  in  this  subdivision  22  hereof  certificates  for  the 
amount  or  par  value  of  935300  dollars  preferred  shares  and 
558000  common  shares,  and  shall  deliver  the  said  shares 
to  or  upon  the  order  of  the  parties  of  the  first  part  hereto. 
From  time  to  time  the  Trustees  shall  deliver  for  each  addi- 
tional share  of  the  common  capital  stock  of  the  said  C.  Com- 
pany received  by  the  Trustees  one  of  the  preferred  shares 
issued  hereunder  and  shall  deliver  for  each  additional  share 
of  the  preferred  stock  of  the  T.  Company  received  by  the 
Trustees,  one  of  the  preferred  shares  issued  hereunder,  and 
for  each  additional  share  of  the  common  stock  of  the  T. 
Company  received  by  the  Trustees,  one  of  the  common 
shares  issued  hereunder  but  the  total  amount  of  the  shares 
issued  hereunder  for  the  purposes  set  forth  in  this  sub- 
division 22  hereof  shall  not  exceed  twenty  thousand  (20,000) 
preferred  shares  and  five  hundred  and  sixty  thousand 
(560,000)  common  shares. 

23.  The  Trustees  shall  from  time  to  time  when  and  as  re- 
quested by  the  Syndicate  Managers  of  the  Syndicate  re- 
ferred to  in  the  Preliminary  Agreement  deliver  to  or  upon 
the  order  of  said  Sjaidicate  Managers  certificates  for  common 
shares  issued  hereunder  up  to  but  not  exceeding  two  hun- 
dred and  twenty  thousand  (220,000)  shares,  upon  receiving 
from  the  Syndicate  Managers  the  sum  of  seven  dollars  and 
twenty-seven  cents  (S7.27)  less  any  discount  allowed  as 
hereinafter  provided  for  each  share  so  issued;  provided 
however  that  any  of  said  two  hundred  and  twenty  thousand 
(220,000)  shares  which  shall  not  have  been  taken  at  the 
above  rate  by  the  said  Syndicate  may  be  issued  by  the 
Trustees  in  accordance  with  the  provisions  of  subdivision 
25  hereof. 

24.  The  Trustees  shall  from  time  to  time  issue  and  de- 
liver common  shares  hereunder  according  to  the  terms 
of  thi3  option  agreement  referred  to  in  the  Preliminary 
Agreement,  up  to  but  not  exceeding  two  hundred  and 
twenty  thousand  (220,000)  shares,  upon  receiving  the 
sum  of  seven  dollars  and  twenty-seven  cents  ($7.27) 
less  any  discount  allowed  as  hereinafter  provided  for 
each  share  so  issued;  provided  however  that  any  of  the 
two   hundred    and    twenty    thousand    (220,000)    common 

436 


NORTH  AMERICAN   COMPANIES 

shares  last  above  mentioned  may  if  not  taken  and  paid 
for  as  provided  by  said  option  agreement  be  issued  by 
the  Trustees  in  accordance  with  the  provisions  of  subdi- 
vision 25  hereof. 

25.  Any  of  the  shares  not  taken  as  provided  in  subdivi- 
sions 23  and  24  hereof  may  be  issued  by  the  Trustees  either 
for  money  or  for  property  or  in  payment  of  liabihties  or 
obUgations  of  the  Trustees,  and  if  issued  for  money  may  be 
issued  fully  paid  up  upon  the  payment  to  the  Trustees  of 
such  sum  as  they  shall  determine  and  if  issued  for  the  whole 
or  any  part  of  the  price  agreed  upon  for  any  property  they 
may  be  issued  fully  paid  up  upon  the  transfer  of  such  prop- 
erty to  the  Trustees.  All  such  shares  may  be  issued  with- 
out offering  the  same  to  existing  Shareholders  or  any  of 
them. 

26.  The  Trustees  may  accept  or  agree  to  accept  payment 
for  any  of  the  shares  issued  by  them  under  subdivisions 
23  or  24  or  25  hereof  in  instalments  and  may  allow  or  agree 
to  allow  such  discount  as  they  may  determine  in  respect  of 
any  instalment  or  instalments  paid  in  advance. 

27.  The  relative  rights  and  interests  and  the  preferences 
and  limitations  of  the  holders  of  the  preferred  shares  and  of 
the  common  shares  shall  be  as  follows : 

The  preferred  shares  shall  entitle  the  holders  to  receive 
when  and  as  declared  by  the  Trustees  dividends  at  the  rate 
of  six  dollars  ($6.00)  per  annum  and  no  more  for  and  on 
account  of  each  such  share.  Such  dividends  shall  be 
cumulative  from  April  1st,  1917  and  the  moneys  there- 
for shall  be  set  apart  before  any  dividends  shall  be  paid 
or  set  apart  for  the  common  shares  so  that  if  in  any  year 
beginning  with  April  1st,  1917  dividends  at  the  said  rate 
shall  not  have  been  declared  upon  the  preferred  shares  and 
set  apart  therefor  the  accumulated  and  unpaid  divi- 
dends thereon  shall  be  set  apart  or  provided  for  before 
any  dividends  shall  be  paid  upon  or  set  apart  for  the  com- 
mon shares. 

28.  Whenever  in  any  year  all  such  dividends  shall  have 
been  declared  on  the  preferred  shares  and  set  apart  and 
after  April  1st,  1917  all  such  cumulative  dividends  shall 
have  been  declared  on  the  preferred  shares  and  set  apart 
any  money  appHcable  by  the  Trustees  for  the  payment  of 

437 


APPENDIX  OF  FORMS 

dividends  then  remaining  in  their  hands  or  under  their 
control  may  to  the  extent  that  the  Trustees  shall  see  fit  be 
distributed  and  paid  as  a  dividend  ratably  among  and  to 
the  holders  of  common  shares  but  before  declaring  any 
dividends  either  upon  the  preferred -or  common  shares  the 
Trustees  may  in  their  uncontrolled  discretion  and  to  the 
extent  the  Trustees  may  see  fit  set  aside  sums  for  reserve 
or  other  purposes  of  the  trust. 

29.  In  any  distribution  by  the  Trustees  of  the  trust 
estate  upon  the  termination  of  the  trust  each  preferred  share 
shall  entitle  the  holder  thereof  to  receive  out  of  the  trust 
estate  available  for  distribution  to  the  Shareholders  the 
sum.  of  one  hundred  dollars  ($100)  or  its  equivalent  and  also 
a  sum  equal  to  six  per  cent,  per  amium  upon  the  amount 
of  such  share  for  the  period  from  April  1st,  1917  to 
the  date  of  distribution  less  the  amount  of  any  divi- 
dends paid  thereon  during  such  period  before  any  amount 
shall  be  paid  to  the  holders  of  the  common  shares. 
After  such  amounts  shall  have  been  paid  in  full  to  or  set 
apart  for  the  holders  of  the  preferred  shares  the  remain- 
der of  the  trust  estate  available  for  distribution  shall  be 
distributed  ratably  among  and  to  the  holders  of  the  com- 
mon shares. 

30.  The  preferred  shares  as  a  whole  may  be  redeemed  at 
the  option  of  the  Trustees  on  any  date  after  April  1st, 
1917  fixed  for  the  payment  of  a  dividend  thereon  and  the 
preferred  shares  may  be  redeemed  from  time  to  time  in 
portions  at  the  option  of  the  Trustees  at  any  date  or  dates 
fixed  for  a  dividend  thereon  upon  the  payment  of  the  one 
hundred  and  three  dollars  ($103)  for  each  such  share  and 
all  unpaid  dividends  accumulated  to  the  date  for  redemp- 
tion and  upon  notice  published  in  a  newspaper  of  general 
circulation  in  the  City  of  New  York,  a  newspaper  of  general 
circulation  in  the  City  of  Philadelphia,  a  newspaper  of  gen- 
eral circulation  in  the  City  of  Boston  and  a  newspaper  of 
general  circulation  in  the  City  of  Montreal  once  a  week  for 
four  successive  weeks  immediately  preceding  the  date  of 
redemption  specified  in  such  notice  and  if  less  than  all  of  the 
preferred  shares  shall  be  called  for  redemption  a  similar 
notice  shall  also  be  mailed  to  each  of  the  persons  in  whose 
name  certificates  for  jireferred  shares  to  be  redeemed  shall 
be  registered  stating  also  the  number  of  shares  called  to  be 

438 


NORTH   AMERICAN   COMPANIES 

redeemed  out  of  the  total  number  standing  in  the  name  of 
the  person  to  whom  such  notice  is  mailed. 

31.  On  or  prior  to  the  date  fixed  for  such  redemption  the 
Trustees  shall  deposit  at  such  office  or  agency  as  shall  be 
designated  in  such  notice  of  redemption  an  amount  of  cash 
equal  to  one  hundred  and  three  dollars  ($103)  for  each 
share  to  be  redeemed  and  the  amount  of  unpaid  dividends 
accumulated  thereon  to  such  date  of  redemption  so  fixed. 
In  case  notice  of  redemption  shall  have  been  published  as 
aforesaid  and  said  sum  of  money  shall  be  so  deposited  at  the 
office  designated  in  said  notice,  dividends  on  the  shares  so 
called  for  redemption  from  and  after  said  date  of  redemp- 
tion shall  cease  and  from  and  after  said  date  the  holders  of 
said  preferred  shares  shall  have  no  further  right  or  interest 
thereunder  or  in  any  part  of  the  trust  estate  except  to  re- 
ceive payment  for  said  shares  out  of  the  funds  so  depos- 
ited by  the  Trustees  at  the  rate  above  provided  upon 
presentation  and  surrender  of  their  respective  certificates 
at  the  office  designated  in  said  notice.  If  the  Trustees 
shall  not  on  or  prior  to  the  date  of  redemption  deposit 
a  sum  of  money  sufficient  to  pay  all  such  shares  in  the 
manner  above  stated  dividends  shall  continue  to  accumulate 
on  said  shares.  If  at  any  time  the  Trustees  shall  determine 
to  call  for  redemption  a  portion  of  all  the  outstanding 
preferred  shares  they  shall  assign  a  number  to  every  out- 
standing preferred  share  and  shall  draw  by  lot  the  shares 
to  be  redeemed. 

32.  The  Trustees  may  in  their  uncontrolled  discretion  at 
any  time  and  from  time  to  time,  apply  any  of  the  income 
from  the  trust  estate  to  the  redemption  of  preferred  shares  by 
purchasing  the  same  in  the  open  market  for  such  price  as 
they  shall  determine  not  to  exceed  one  hundred  and  three 
dollars  (1103)  for  each  share  and  all  unpaid  dividends  ac- 
cumulated to  the  date  of  the  purchase. 

33.  As  evidence  of  the  ownership  of  said  preferred  and 
common  shares  the  Trustees  shall  cause  to  be  issued  trans- 
ferable certificates  each  of  which  certificates  and  the  form 
for  the  transfer  thereof  shall  be  substantially  in  the  follow- 
ing forms  respectively  except  that  the  Trustees  are  hereby 
authorized  to  modify  the  same  from  time  to  time  in  any 
manner  not  inconsistent  with  the  terms  and  conditions 
hereof. 

439 


APPENDIX  OF  FORMS 


Face  of  Certificate  for  Preferred  Shares 

North  American  Companies 
No Shares. 

This  certifies  that is  the  holder 

of preferred  shares  fully  paid  and  non- 
assessable of  the  amount  or  par  value  of  $100  each  in  the 
Trust  called  North  American  Companies  estabhshed  by  an 
Agreement  and  Declaration  of  Trust  dated  May  5th,  1915 
between  D.,  T.  and  C.  parties  of  the  first  part  and  W.  and 
H.  as  Trustees  parties  of  the  second  part  and  the  holders  of 
the  shares  issued  thereunder  parties  of  the  third  part.  The 
said  shares  are  issued,  received  and  held  subject  to  the  pro- 
visions set  forth  on  the  back  of  this  Certificate  which  are 
expressly  made  a  part  hereof  and  to  wliich  reference  is 
hereby  expressly  directed.  The  shares  represented  by  this 
Certificate  are  transferable  only  by  the  holder  in  person  or 
by  attorney  on  the  books  of  the  Trustees  under  the  said 
Agreement  and  Declaration  of  Trust  upon  surrender  of  this 
Certificate  properly  endorsed. 

In  Witness  Whereof  the  Trustees  under  the  said  Agree- 
ment and  Declaration  of  Trust  have  signed  this  Certificate 
this day  of 19 .  . . 


As  Trustees  under  the  Agreement  and 
Declaration  of  Trust  dated  May  5th, 
1915  establishing  the  Trust  therein 
called  North  American  Companies 
and  not  individually. 


440 


NORTH   AMERICAN   COMPANIES 


Face  of  Certificate  for  Common  Shares 

North  American  Companies 
No Shares. 

This   certifies   that    is   the   holder   of 

common  shares  fully  paid  and  non- 
assessable without  expressed  amount  or  par  value  in  the 
Trust  called  North  American  Companies  established  by 
an  Agreement  and  Declaration  of  Trust  dated  May  5th, 
1915  between  D.,  T.  and  C.  parties  of  the  first  part  and 
W.  and  H.  as  Trustees  parties  of  the  second  part  and  the 
holders  of  the  shares  issued  thereunder  parties  of  the  third 
part.  The  said  shares  are  issued,  received  and  held  subject 
to  the  provisions  set  forth  on  the  back  of  this  Certificate 
which  are  expressly  made  a  part  hereof  and  to  which  refer- 
ence is  hereby  expressly  directed.  The  shares  represented 
by  this  Certificate  are  transferable  only  by  the  holder  in 
person  or  by  attorney  on  the  books  of  the  Trustees  under 
the  said  Agreement  and  Declaration  of  Trust  upon  surrender 
of  this  Certificate  properly  endorsed. 

In  Witness  Whereof  the  Trustees  under  the  said  Agree- 
ment and  Declaration  of  Trust  have  signed  this  Certificate 
this day  of 19 .  . 


As  Trustees  under  the  Agreement  and 
Declaration  of  Trust  dated  May  5th, 
1915  establishing  the  Trust  therein 
called  North  American  Companies 
and  not  individually. 


441 


APPENDIX   OF   FORMS 

Back  of  Certificates  for  both  Preferred  and  Common 
Shares 

Pro\asions  referred  to  on  the  face  of  this  Certificate: 

1.  The  Agreement  and  Declaration  of  Trust  (hereinafter 
called  the  Trust  Agreement)  referred  to  on  the  face  of  this 
Certificate  provides  that  the  beneficial  interest  in  the  trust 
estate  thereby  established  shall  be  divided  into  20,000  pre- 
ferred shares  expressed  to  be  of  the  amount  or  par  value  of 
$100  each  and  1,000,000  common  shares  without  expressed 
amount  or  par  value  and  provides  for  the  issue  of  the  said 
shares  by  the  Trustees  thereunder. 

2.  As  and  to  the  extent  provided  in  the  Trust  Agreement 
(a)  The  shares  are  of  two  classes,  to  wit,  preferred  and 

common. 

(6)  The  holders  of  the  preferred  shares  are  entitled  to  re- 
ceive when  and  as  declared  by  the  Trustees  dividends  at 
the  rate  of  six  dollars  ($6.00)  per  annum  and  no  more  for 
and  on  account  of  each  such  share.  Such  dividends  are  cum- 
ulative from  April  1st,  1917  and  the  moneys  therefor  shall 
be  set  apart  before  any  dividends  shall  be  paid  or  set  apart 
for  the  common  shares  so  that  if  in  any  year  beginning  with 
April  1st,  1917  dividends  at  the  same  rate  shall  not  have 
been  declared  upon  the  preferred  shares  and  set  apart  there- 
for the  accumulated  and  unpaid  dividends  thereon  shall  be 
set  apart  or  provided  for  before  any  dividends  shall  be  paid 
upon  or  set  apart  for  the  common  shares. 

(c)  Whenever  in  any  year  all  such  dividends  shall  have 
been  declared  on  the  preferred  shares  and  set  apart  and  after 
April  1st,  1917  all  such  cumulative  dividends  shall  have 
been  declared  on  the  preferred  shares  and  set  apart  any 
money  applicable  by  the  Trustees  for  the  payment  of  divi- 
dends then  remaining  in  their  hands  or  under  their  control 
may  to  the  extent  that  said  Trustees  shall  see  fit  be  dis- 
tributed and  paid  as  a  dividend  ratably  among  and  to  the 
holders  of  the  common  shares  but  before  declaring  any  divi- 
dends cither  upon  the  preferred  or  common  shares  the 
Trustees  may  in  their  uncontrolled  discretion  and  to  the 
extent  the  Trustees  may  see  fit  set  aside  sums  for  reserve 
or  other  purposes  of  the  trust. 

{d)  In  any  distribution  by  the  Trustees  of  the  trust  es- 

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NORTH  AMERICAN   COMPANIES 

tate  upon  the  termination  of  the  trust  each  preferred  share 
shall  entitle  the  holder  thereof  to  receive  out  of  the  trust 
estate  available  for  distribution  to  the  Shareholders  the  sum 
of  one  hundred  dollars  ($100)  or  its  equivalent  and  also  a  sum 
equal  to  six  per  cent,  per  annum  upon  the  amount  of  such 
share  for  the  period  from  April  1st,  1917  to  the  date  of  dis- 
tribution less  the  amount  of  any  dividends  paid  thereon 
during  such  period  before  any  amount  shall  be  paid  to  the 
holders  of  the  common  shares.  After  such  amounts  shall 
have  been  paid  in  full  to  or  set  apart  for  the  holders  of  the 
preferred  shares  the  remainder  of  the  trust  estate  available 
for  distribution  shall  be  distributed  ratably  among  and  to 
the  holders  of  the  common  shares. 

(e)  The  preferred  shares  as  a  whole  may  be  redeemed  at 
the  option  of  the  Trustees  on  any  date  after  April  1st,  1917 
fixed  for  the  payment  of  a  dividend  thereon  and  the  pre- 
ferred shares  may  be  redeemed  from  time  to  time  in  portions 
at  the  option  of  the  Trustees  at  any  date  or  dates  fixed  for 
a  dividend  thereon  upon  the  payment  of  one  hundred  and 
three  dollars  ($103)  for  each  such  share  and  all  unpaid 
dividends  accumulated  to  the  date  for  redemption  upon 
notice  published  in  a  newspaper  of  general  circulation  in 
the  City  of  New  York,  a  newspaper  of  general  circulation 
in  the  City  of  Philadelphia,  a  newspaper  of  general  circula- 
tion in  the  City  of  Boston  and  a  newspaper  of  general  cir- 
culation in  the  City  of  Montreal  once  a  week  for  four  suc- 
cessive weeks  immediately  preceding  the  date  of  redemption 
specified  in  such  notice,  and  if  less  than  all  of  the  preferred 
shares  shall  be  called  for  redemption  a  similar  notice  shall 
also  be  mailed  to  each  of  the  persons  in  whose  names  cer- 
tificates for  preferred  shares  to  be  redeemed  shall  be  regis- 
tered stating  also  the  number  of  shares  called  to  be  redeemed 
out  of  the  total  number  standing  in  the  name  of  the  person 
to  whom  such  notice  is  mailed.  In  case  notice  of  redemption 
shall  have  been  published  as  aforesaid  and  the  amount  to  be 
paid  upon  the  shares  at  redemption  shall  have  been  deposited 
at  an  office  or  agency  of  the  Trustees  at  or  before  the  date 
for  redemption,  dividends  on  the  shares  called  for  redemp- 
tion from  and  after  said  date  shall  cease  and  from  and  after 
said  date  the  holders  of  said  preferred  shares  shall  have  no  fur- 
ther right  or  interest  thereunder  or  in  any  part  of  the  trust 
estate  except  to  receive  payment  for  said  shares  out  of  the 

443 


APPENDIX  OF   FORMS 

funds  so  deposited  by  the  Trustees  at  the  rate  aforesaid 
upon  presentation  and  surrender  of  their  respective  certifi- 
cates at  the  office  designated  in  said  notice. 

3.  All  the  provisions  of  the  Trust  Agreement  are  hereby 
made  a  part  hereof  as  if  the  same  were  herein  set  forth  at 
length  and  reference  is  hereby  also  made  to  the  Prehminary 
Agreement  therein  mentioned  among  the  parties  of  the  first 
part  to  the  Trust  Agreement  in  pursuance  of  which  Pre- 
liminary Agreement  and  subject  to  the  terms  of  which  the 
Trust  Agreement  is  made  and  all  the  said  shares  are  issued, 
received  and  held  subject  and  the  holder  hereof  hereby  ex- 
pressly assents  to  all  the  provisions  of  the  Trust  Agreement 
and  the  Prehminary  agreement.  An  original  of  the  Trust 
Agreement  and  of  the  Preliminary  Agreement  are  lodged 
with  the  Trustees  at  their  office  and  are  open  to  the  inspec- 
tion of  any  Shareholder  during  business  hours. 

4.  The  within  Certificate  is  made  by  the  Trustees  not  in- 
dividually but  as  Trustees  under  the  Trust  Agreement  and 
any  and  all  personal  liability  of  the  parties  of  the  first  part 
named  in  the  Trust  Agreement  and  of  the  Trustees,  execu- 
tive committee  and  the  Shareholders  thereunder  is  by  the 
acceptance  and  as  a  consideration  for  the  issue  and  execu- 
tion hereof  expressly  waived  by  the  holder  hereof. 

For  value  received hereby  sell,  assign 

and   transfer   unto •  •  • 

of  the  shares  represented  by  the  within  Certificate  and  do 

hereby  irrevocably  constitute  and  appoint 

Attorney  to  transfer  the  said  shares  on  the  books  of  the 
Trustees  under  the  within  mentioned  Agreement  and  Dec- 
laration of  Trust  with  full  power  of  substitution  in  the 
premises. 

Dated ,19.. 


In  presence  of 


Notice.  The  signature  to  this  assignment  must  cor- 
respond witli  the  name  as  written  upon  the  face  of  the  Certifi- 
cate; in  (!very  i:)urti(nilar  without  alteration  or  enlargement  or 
any  change  whatever. 

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NORTH   AMERICAN   COMPANIES 

34.  An  original  of  this  Trust  Agreement  and  of  the  Pre- 
liminary Agreement  herein  referred  to  shall  be  lodged  with 
the  Trustees  and  kept  at  their  office  and  shall  be  open  to  the 
inspection  of  any  Shareholder  during  business  hours. 

35.  No  certificate  shall  be  issued  for  less  than  one  share  of 
either  class.  Certificates  may  be  signed  by  the  Trustees  or 
by  any  agent  thereunto  authorized  by  them.  In  case  any 
of  the  Trustees  in  whose  name  and  in  whose  behalf  any  of 
said  certificates  shall  have  been  signed  shall  cease  to  act  in 
such  capacity  before  the  certificate  so  signed  shall  have 
been  issued,  such  certificate  may,  nevertheless,  be  issued  as 
if  the  persons  in  whose  name  and  in  whose  behalf  such  cer- 
tificates were  signed  had  not  ceased  to  be  such  Trustees. 

36.  The  Trustees  shall  keep  or  cause  to  be  kept  at  an  office 
or  agency  in  the  City  of  Boston  or  in  the  City  of  New  York 
or  in  the  City  of  Philadelphia  or  in  the  City  of  Montreal, 
or  in  either  of  said  cities,  transfer  books  in  which  shall  be 
registered  the  names  of  the  holders  of  the  certificates  to- 
gether with  the  post  office  address  of  each,  as  given  by  him 
for  such  purpose.  The  Tiiistees  may  appoint  a  Transfer 
Agent  to  keep  such  books  and  may  require  that  all  certificates 
before  issue  shall  be  countersigned  by  such  Transfer  Agent 
and  that  no  such  certificates  shall  be  or  become  valid  for  any 
purpose  until  so  countersigned.  The  Trustees  may  also  ap- 
point a  Registrar  and  may  require  that  all  certificates  for 
shares  issued  hereunder  shall  be  countersigned  by  such 
Registrar  and  that  no  such  certificates  shall  be  or  become 
valid  for  any  purpose  until  so  countersigned.  Shares  shall 
only  be  transferable  on  said  books  upon  the  execution  of  a 
transfer  substantially  in  the  form  endorsed  on  said  certificates 
and  on  surrender  of  the  certificate  by  the  registered  holder 
in  person  or  by  attorney  and  in  accordance  and  compliance 
with  such  rules  and  regulations  as  from  time  to  time  the 
Trustees  may  establish.  The  Trustees,  any  Transfer  Agent 
or  Registrar  appointed  by  them.  Executive  Committee,  and 
all  other  persons  may  deem  and  treat  the  person  in  whose 
name  any  certificate  shall  be  registered  upon  the  books  kept 
as  above  provided  as  the  absolute  owner  of  the  share  or 
shares  represented  by  such  certificate  for  the  purpose  of 
receiving  any  dividend  or  other  pajrments  on  or  in  respect 
thereof,  for  the  purpose  of  voting  and  acting  in  respect 
thereof  and  for  all  other  purposes,  and  none  of  them  shall 

445 


APPENDIX  OF   FORMS 

be  affected  by  any  notice  to  the  contrary.  Such  transfer 
books  may  be  closed  by  the  Trustee  at  and  during  any 
period  prior  to  the  date  of  pajonent  of  any  dividend  or  the 
distribution  of  anj'  part  of  the  Trust  Estate  upon  the 
shares,  or  prior  to  the  date  of  any  meeting  of  Share- 
holders. The  Trustees  may  also  close  such  transfer  books 
for  such  other  reason  and  for  such  period  as  they  may 
deem  advisable. 

37.  Until  permanent  certificates  can  be  prepared  the 
Trustees  may  issue  and  deliver  in  lieu  thereof  and  subject  to 
the  same  pro\Tsions,  limitations  and  conditions,  temporary 
t}-peTvritten,  printed  or  lithographed  certificates  substan- 
tially of  the  purport  of  the  certificates  heretofore  recited. 
Such  temporary  certificates  shall  be  countersigned  by  the 
Transfer  Agent  or  by  the  Registrar  in  the  manner  above 
pro\'ided  if  any  such  Transfer  Agent  or  Registrar  or  both 
shall  have  been  appointed  by  the  Trustees  in  like  manner  as 
herein  pro%'ided  T\-ith  respect  to  the  permanent  certificates. 
Such  temporary  certificates  shall  be  exchangeable  at  an 
office  of  the  Trustees  for  permanent  certificates  w-ithout 
expense  to  the  holder,  and  until  such  exchange  the  said 
temporary  certificates  shall  be  transferable  in  the  same  man- 
ner as  permanent  certificates  and  shall  entitle  the  holder  to 
the  same  rights  as  permanent  certificates. 

38.  In  case  of  the  mutilation,  loss  or  destruction  of  any 
certificate,  the  Trustees  may  on  e^-idence  satisfactory  to 
them  that  it  has  been  so  mutilated,  lost  or  destroyed  and 
upon  such  terms  as  to  indemnity  and  otherwise  as  ma}'  be 
prescribed  by  them,  issue  a  new  certificate  or  certificates  in 
the  place  of  the  certificate  mutilated,  lost  or  destroyed. 

39.  Everj'  transfer  (other\\-ise  than  by  operation  of  law) 
of  any  share  and  the  interest  represented  thereby  shall  be 
in  %\Titing  bj^  the  owner  and  registered  holder,  and  upon 
delivery  thereof  with  the  existing  certificate  for  such  share 
to  the  Trustees  of  their  Transfer  Agent  shall  be  recorded  on 
the  transfer  books  and  a  new  certificate  shall  be  given  to  the 
transferee.  In  case  of  a  transfer  of  only  a  part  of  the  shares 
in  any  certificate,  a  new  certificate  for  the  residue  thereof 
shall  be  given  to  the  transferor.  Until  the  transfer  shall  be 
so  delivered  and  recorded  the  transferor  shall  be  deemed  to 
be  the  holder  of  the  share  or  shares  comprised  therein  for 
all  the  purposes  of  the  trusts  hereof,  and  neither  the  Trustees 

446 


NORTH  AMERICAN   COMPANIES 

nor  their  Transfer  Agent  shall  be  affected  by  any  notice  of 
any  unrecorded  transfer  or  otherwise  to  the  contrary. 

40.  Any  person  becoming  entitled  to  any  share  in  con- 
sequence of  the  death,  bankruptcy  or  insolvency  of  any  Share- 
holder in  any  way  other  than  by  a  transfer  in  accordance 
with  the  subdivision  39  hereof,  upon  the  production  of  such 
evidence  of  his  title  as  may  be  prescribed  by  the  Trustees 
and  upon  surrender  of  the  said  certificate  to  the  Trustees 
or  one  of  their  Transfer  Agents,  shall  be  registered  in  the 
transfer  books  as  the  holder  of  the  said  shares  and  receive 
new  certificates  for  the  same. 

41.  Two  or  more  persons  holding  any  share  shall  be  joint 
tenants  of  the  entire  interest  therein  and  no  entry  shall  be 
made  on  any  certificate  or  in  the  Trustees'  books  that  any 
person  is  entitled  to  any  future,  limited  or  contingent  in- 
terest in  any  share.  But  any  person  registered  as  the  holder 
of  any  share  may,  subject  to  the  provisions  hereinafter  con- 
tained, be  described  therein  as  a  Trustee  of  any  kind,  and 
any  words  may  be  added  to  the  description  to  identify  the 
trust. 

42.  The  Trustees  shall  not,  nor  shall  the  Committee  or 
Shareholders  or  any  Transfer  Agent  or  other  agent  of  the 
Trustees  or  Committee,  be  bound  to  take  notice  or  be 
affected  by  notice  of  any  trust,  whether  express,  implied  or 
constructive,  or  any  charge  or  equity  to  which  any  of  the 
said  shares  or  the  interest  of  any  of  the  Shareholders  in  the 
trusts  in  these  presents  may  be  subject  or  to  ascertain  or 
inquire  whether  any  sale  or  transfer  of  any  such  share  or 
interest  by  any  such  Shareholder  or  his  personal  representa- 
tives is  authorized  by  such  trust,  charge  or  equity,  or  to 
recognize  any  person  as  having  any  interest  therein  except 
the  persons  registered  as  such  Shareholders,  and  the  receipt 
of  the  person  in  whose  name  any  share  is  registered  or  if  such 
share  is  registered  in  the  names  of  more  than  one  person  the 
receipt  of  one  of  said  persons  shall  be  a  sufficient  discharge 
for  all  dividends  and  other  money  payable  in  respect  of  said 
shares  and  from  all  liability  to  see  to  the  application  thereof. 

43.  Unless  specific  notice  to  the  contrary  shall  have  been 
given  in  writing  to  the  Trustees  or  their  Transfer  Agent, 
they  may  deem  and  treat  any  person  presenting  a  share 
certificate  together  with  the  transfer  thereof  purporting  to 

447 


APPENDIX  OF  FORMS 

be  signed  by  the  registered  holder  of  such  certificate  as  the 
bona  fide  and  sole  owTier  thereof  and  accordingly  on  demand 
they  may  transfer  the  shares  thereby  represented. 

Meetings  of  the  Shareholders 

44.  An  Annual  Meeting  of  the  Shareholders  for  the  elec- 
tion of  Trustees  and  the  transaction  of  such  other  business 
as  maj^  be  brought  before  the  meeting  shall  be  held  at  the 
office  of  the  Trustees  or  such  other  place  as  may  be  deter- 
mined by  the  Trustees  on  the  second  Tuesday  of  May  in 
each  year  at  twelve  o'clock  noon,  beginning  with  the  year 
1916.  At  every  such  meeting  the  Trustees  shall  lay  before 
the  Shareholders  an  account  of  the  receipts  and  expenditures 
and  income  account  of  the  trust  estate  for  the  year  ending 
on  the  31st  day  of  December  next  preceding  such  meeting. 
The  Trustees  and  any  Shareholder  may  also  submit  at  any 
such  meeting  any  report,  resolution  or  proposition  concern- 
ing which  action  by  the  Shareholders  is  desired.  At  each 
amiual  meeting  the  whole  number  of  Trustees,  as  fixed  by 
this  agreement  and  declaration  of  trust,  or  as  increased  or 
decreased  under  the  provisions  hereof  shall  be  elected  by  the 
Shareholders  and  any  business  brought  before  the  meeting 
may  be  considered  or  transacted. 

45.  Neglect  or  failure  to  hold  such  annual  meeting  shall 
not  cause  any  vacancy  among  the  Trustees  and  the  persons 
acting  as  Trustees  shall  continue  to  act  until  the  holding  of 
such  meeting. 

46.  The  Trustees  may  at  any  time  call  a  special  meeting 
of  the  Shareholders  to  be  held  at  such  place  as  the  Trustees 
may  determine.  At  a  special  meeting  no  business  shall  be 
transacted  other  than  such  as  is  included  in  the  purposes  for 
which  the  meeting  is  called. 

47.  The  Chairman  of  the  Executive  Committee  shall  pre- 
side at  every  meeting  of  the  Shareholders  but  if  he  is  not 
present  at  the  commencement  of  the  meeting  or  being  present 
shall  not  be  willing  to  preside  or  shall  not  be  acceptable  for 
such  purpose  to  the  Shareholders  present  they  may  choose 
another  person  to  preside. 

48.  Written  or  printed  notice  of  the  annual  meeting  and 
of  special  meetings  of  the  Shareholders  shall  be  given  seven 
days  at  least  before  any  such  meeting  on  behalf  of  the  Trus- 

448 


NORTH  AMERICAN   COMPANIES 

tees  to  each  of  the  Shareholders  by  such  person  as  the  Trus- 
tees may  designate  as  their  Secretary  and  in  such  manner  as 
the  Trustees  may  prescribe  or  approve,  and  such  notice 
shall  specify  the  time  and  place  of  the  meeting,  and  in  the 
case  of  a  special  meeting,  shall  state  the  purposes  thereof. 
The  Shareholders  may  waive  in  writing  the  notice  required 
for  annual  and  special  meetings  of  Shareholders.  No  failure 
to  give  notice  and  no  irregularity  in  notice  of  the  annual 
meeting  or  in  the  mailing  thereof  shall  affect  the  validity  of 
such  meeting  or  of  any  proceedings  thereof. 

49.  At  all  meetings  every  Shareholder  shall  have  one 
vote  for  every  share  standing  in  his  name  on  the  books  of 
the  Trustees  whether  preferred  or  common  and  may  vote  in 
person  or  by  proxy  appointed  by  him  in  writing  or  in  the 
case  of  a  corporation  appointed  by  it  in  writing  under  its 
corporate  seal.  The  holders  of  a  majority  of  all  the  shares 
issued  and  outstanding  shall  constitute  a  quorum  for  the 
transaction  of  business,  but  the  holders  of  a  less  amount 
may  from  time  to  time  adjourn  the  meeting  to  a  time  fixed 
by  them  without  further  notice  to  the  Shareholders  of  the 
time  so  fixed  for  the  holding  of  such  adjourned  meeting. 

50.  If  the  holder  of  any  share  be  a  minor  or  a  person  of 
unsound  mind  or  subject  to  the  legal  control  of  any  other 
person  as  regards  the  control  or  management  of  such  share, 
he  may  vote  by  his  guardian,  tutor,  committee,  curator  or 
other  person  having  such  control,  and  such  vote  may  be 
given  in  person  or  by  proxy.  When  any  share  is  held  jointly 
by  several  persons  any  one  of  them  may  vote  at  any  meeting 
in  person  or  by  proxy  in  respect  of  such  share  but  if  more  than 
one  of  them  shall  be  present  at  such  meeting  in  person  or  by 
proxy  no  vote  shall  be  received  m  respect  of  such  share  unless 
all  such  persons  so  present  join  in  or  assent  to  such  vote. 

51.  For  the  purpose  of  determining  the  Shareholders  en- 
titled to  vote  at  any  meeting  the  Trustees  may  close  the 
transfer  books  at  the  end  of  such  day  as  they  may  direct 
and  the  same  shall  remain  closed  until  the  end  of  the  meet- 
ing and  no  person  shall  be  entitled  to  vote  at  such  meeting 
whose  name  is  not  entered  on  the  transfer  books  prior  to  the 
closing  thereof. 

52.  Except  as  otherwise  herein  provided  a  majority  of  the 
votes  given  at  any  meeting  shall  constitute  the  action  of  the 

449 


APPENDIX   OF  FORMS 

meeting  and  in  case  of  an  equality  in  number  of  votes  the 
Chairman  of  the  meeting  shall  have  an  additional  vote. 

53.  At  any  time  the  Shareholders  may  consent  to  the 
termination  by  the  Trustees  of  the  trust  hereby  created  at 
an  eq,rlier  date  or  different  time  than  elsewhere  in  this  agree- 
ment limited  or  prescribed  and  may  consent  to  any  amend- 
ment change  or  addition  to  these  presents  or  to  any  of  the 
terms  and  provisions  hereof  which  shall  have  been  adopted 
by  the  Trustees.  Any  such  consent  may  be  given  without 
a  meeting  of  the  Shareholders  by  writing  signed  by  the  hold- 
ers of  at  least  two-thirds  in  number  of  all  the  shares  at  the 
time  outstanding  or  at  a  meeting  of  the  Shareholders  by  resolu- 
tion adopted  by  the  affirmative  votes  of  the  holders  of  at  least 
two-thirds  in  number  of  all  the  shares  at  the  time  outstand- 
ing. No  such  action  shall  however  be  taken  at  a  meeting  of 
the  Shareholders  either  annual  or  special  unless  the  proposed 
action  shall  have  been  referred  to  in  the  notice  of  the  meeting. 

54.  Every  notice  to  the  Shareholders  required  or  provided 
for  in  these  presents  may  be  given  to  them  personally 
or  b}^  sending  it  to  them  through  the  post  office  in  a  postage 
prepaid  letter  addressed  to  each  of  them  respectively  at 
his  address  as  the  same  appears  on  the  records  of  the  Trus- 
tees and  posted  in  the  City  of  Boston  or  the  City  of  New 
York  or  the  City  of  Philadelphia  or  the  City  of  Montreal 
and  shall  be  deemed  to  have  been  given  at  the  time  when 
it  is  so  posted.  Any  notice  so  sent  to  the  registered  address 
of  any  Shareholder  shall  be  deemed  to  have  been  duly  sent 
in  respect  of  any  such  share  notwithstanding  such  Share- 
holder be  then  deceased  and  whether  the  Trustees  or  the 
members  of  the  Committee  or  any  person  sending  the  notice 
shall  have  knowledge  or  not  of  his  death  until  some  other 
person  shall  be  registered  as  a  holder.  The  certificate  of 
the  person  or  persons  giving  such  notice  shall  be  sufficient 
evidence  thereof  and  shall  protect  persons  acting  in  good 
faith  in  reliance  upon  such  certificate. 

Duration  of  the  Trust 

55.  Unless  sooner  terminated  as  provided  in  subdivi- 
sion 56  hereof  the  trust  hereby  created  shall  continue  until 
the  expiration  of  twenty-one  (21)  years  after  the  death  of 
the  last  survivor   of  the  following  named  persons: 

450 


NORTH  AMERICAN   COMPANIES 

and  upon  the  expiration  of  such  period  the  trust  shall  ter- 
minate. 

56.  The  Trustees  may  with  the  consent  of  the  Shareholders 
given  in  accordance  with  subdivision  53  hereof  terminate 
the  trust  hereby  created  at  an  earlier  date  or  different  time 
than  that  limited  or  prescribed  in  subdivision  55  hereof. 

57.  Upon  the  termination  of  the  trust  hereby  created 
whether  by  limitation  of  time  as  provided  in  subdivision 
55  hereof  or  by  action  of  the  Trustees  with  the  consent  of 
the  Shareholders  as  provided  in  subdivisions  53  and  56 
hereof  the  Trustees  shall  sell  or  "otherwise  dispose  of  the  trust 
estate  for  considerations  and  upon  such  terms  as  in  their 
absolute  and  uncontrolled  discretion  they  shall  fix  and 
determine  not  however  inconsistent  with  the  terms  and 
conditions  of  this  agreement.  The  proceeds  of  such  sale 
shall  be  applied  as  follows : 

First.  To  the  payment  of  all  prior  costs,  charges  and  ex- 
penses; 

Second.  To  the  payment  of  any  then  existing  indebted- 
ness incurred  or  issued  by  or  on  behalf  of  the  Trustees  with 
the  written  approval  of  the  Trustees; 

Third.  To  the  payment  of  all  charges,  expenses  and  lia- 
bilities of  the  Trustees  and  of  the  Executive  Committee  in- 
curred in  connection  with  the  administration,  management, 
control  and  termination  of  the  trust  hereby  created; 

Fourth.  The  remainder  thereof  shall  be  distributed  among 
the  Shareholders  as  provided  in  subdivision  29  hereof. 

In  case  the  trust  estate  shall  be  sold  and  disposed  of 
partly  for  cash  (always  provided  that  there  shall  be  cash 
sufficient  for  the  purposes  hereinabove  enumerated  in  divi- 
sions First,  Second  and  Third  of  this  subdivision  57  hereof 
and  partly  for  securities  or  other  property),  the  Trustees 
shall  place  a  valuation  upon  such  securities  or  other  prop- 
erty and  shall  distribute  the  same  in  kind  to  the  Share- 
holders on  the  basis  set  forth  in  division  Fourth  of  this  sub- 
division 57  it  being  within  the  absolute  and  uncontrolled 
discretion  of  the  Trustees  to  determine  what  part,  if  any, 
shall  be  paid  to  the  holders  of  the  preferred  and  common 
shares  in  cash  and  what  in  securities  or  other  property. 
Any  valuation,  determination,  sale  or  distribution  so  made 
by  the  Trustees  shall  be  conclusive  upon  all  Shareholders 
and  other  persons  interested  in  the  trust  estate.    Any  Trus- 

451 


APPENDIX   OF  FORMS 

tee  or  any  member  of  the  Executive  Committee  or  any  Share- 
holder may  bid  for  and  purchase  any  property  at  any  sale 
at  public  auction  pr  private  sale  without  accountability 
except  for  the  pajinent  of  the  purchase  price.  In  making 
any  sale  the  Trustees  shall  have  the  right  to  sell  at  public 
auction  or  private  sale  and  to  buy  in  at  such  sale  or  rescind 
or  vary  any  contract  of  sale  and  to  sell  without  being  an- 
swerable for  loss;  and  in  connection  therewith  to  execute 
any  and  all  deeds  and  instruments. 

Miscellaneous  Provisions 

58.  The  ownership  of  any  share  or  any  security  or  obliga- 
tion issued  hereunder  in  accordance  with  the  provisions 
hereof  shall  not  entitle  such  owner  to  any  title  in  or  to  the 
trust  estate  whatsoever  or  to  any  right  to  terminate  the 
trust  hereby  created  or  to  any  right  to  require  any  distribu- 
tion or  partition  of  the  trust  estate  or  any  part  thereof  other 
than  in  accordance  wdth  the  terms  and  provisions  hereof. 

59.  The  death  of  any  Trustee  or  of  any  holder  of  any 
share  or  security  issued  hereunder  in  accordance  with  the 
provisions  hereof  at  any  time  during  the  continuance  of  the 
trust  hereby  created  shall  not  operate  to  terminate  the  said 
trust  and  shall  not  entitle  the  legal  representatives  of  the 
deceased  Trustee  or  of  such  deceased  holder  to  terminate 
this  trust  or  to  require  any  accounting  or  distribution  or 
partition  of  the  trust  estate  or  of  any  part  thereof,  but  the 
legal  representatives  or  assigns  of  any  deceased  holder  of 
any  share  or  other  security  issued  hereunder  shall  succeed 
to  the  rights  of  such  decedent. 

60.  Nothing  in  this  agreement  or  in  the  certificates  issued 
hereunder  expressed  or  implied  is  intended  or  shall  be  con- 
strued to  give  to  any  person  or  corporation  other  than  the 
parties  hereto  including  the  Shareholders  any  legal  or  equit- 
able right,  remedy  or  claim  under  or  in  respect  of  this  agree- 
ment or  of  any  covenant,  condition  or  provision  therein 
contained,  all  its  covenants,  conditions  and  provisions  being 
intended  to  be  and  being  for  the  sole  and  exclusive  benefit 
of  the  parties  hereto  including  the  Shareholders. 

61.  In  the  construction  of  the  provisions  of  this  agree- 
ment and  the  certificates  issued  hereunder  the  word  "Trus- 
tees" whenever  used  means  the  Trustees  for  the  time  being, 

452 


NORTH  AMERICAN  COMPANIES 

whether  original  or  successor,  and  the  word  Trustee  shall 
apply  to  any  one  of  the  Trustees  whenever  the  context  so 
admits.  Whenever  the  word  "stock"  is  used  herein  it  shall 
be  deemed  to  extend  to  and  include  voting  trust  certificates 
for  any  such  stock. 

62.  The  headings  of  different  parts  of  these  presents  and 
the  marginal  notes  are  inserted  for  convenience  of  reference 
and  are  not  to  be  taken  to  be  any  part  of  these  presents  or  to 
control  or  affect  the  meaning,  construction  or  effect  of  the  same. 

63.  The  Trustees  may  with  the  consent  of  the  Share- 
holders given  in  accordance  with  subdivision  53  hereof 
amend,  change  or  add  to  these  presents  and  any  of  the  terms 
and  provisions  thereof  in  any  manner  and  to  any  extent,  but 
no  such  amendment  shall  affect  the  validity  or  effect  of  any- 
thing previously  done  by  the  Trustees  or  Shareholders  here- 
under. 

64.  This  instnmient  is  executed  by  the  Trustees  and  de- 
livered by  all  the  parties  hereto  in  the  Commonwealth  of 
Massachusetts  and  with  reference  to  the  laws  thereof;  and 
the  rights  of  all  parties  and  the  construction  and  effect  of 
each  and  every  provision  hereof  shall  be  determined  by  the 
laws  of  said  Commonwealth. 

65.  This  agreement  is  executed  in  five  counterparts  by 
the  parties  of  the  first  and  second  parts,  each  of  which 
counterparts  shall  be  deemed  an  original  and  the  acceptance 
of  the  certificates  issued  hereunder  shall  constitute  the  Share- 
holders parties  to  this  agreement  with  the  same  force  and 
effect  as  if  they  had  hereunto  signed  their  names  and  af- 
fixed their  seals. 

In  Witness  Whereof  at  the  City  of  Boston  in  the  Com- 
monwealth of  Massachusetts  the  parties  of  the  first  and 
second  parts  have  hereunto  subscribed  their  names  and 
affixed  their  seals  as  of  the  day  and  year  above  written. 


Parties  of  the  first  part. 


Trustees. 
453 


FORM  OF  LIMITATION  OF  LIABILITY  IN  LEASE 

Provided  always,  and  it  is  hereby  declared  and  agreed, 
that  any  claim  for  debt  or  damages  under  the  reservations 
of  rent  and  the  covenants  on  the  part  of  the  lessees  herein 
contained  or  any  of  them  shall  be  a  charge  upon  and  shall 
be  enforceable  against  the  property  and  effects  subject  to 
the  trusts  of  the  said  indenture  at  the  time  of  proceedings 
to  enforce  the  same,  but  no  such  claim  for  debt  or  damages 
nor  any  other  claim  under  the  stipulations  herein  contained 
shall  be  enforceable  against  any  trustees  or  trustee  for  the 
time  being  of  said  indenture  personally,  and  neither  the  trus- 
tees for  the  time  being  nor  the  shareholders  under  said 
indenture  of  trust  shall  be  held  to  any  personal  liability  under 
or  by  reason  of  any  of  the  stipulations  herein  contained. 
But  this  provision  shall  not  prevent  the  lessor  from  obtain- 
ing and  enforcing  such  decree  in  equity  against  the  trustees 
for  the  time  being  as  may  be  necessary  or  appropriate  to 
compel  the  application  of  the  property  and  effects  then  in 
their  hands  as  trustees  to  the  performance  of  the  stipula- 
tions of  this  lease  or  to  prevent  the  trustees  for  the  time 
being  from  violating  the  stipulations  herein  contained,  and 
this  provision  shall  not  prevent  the  lessor  from  maintaining 
such  proceedings  as  may  be  necessary  or  appropriate  to 
obtain  possession  of  the  demised  premises  in  case  of  a  vio- 
lation of  the  provisions  hereof;  nor  shall  this  provision  other- 
wise interfere  with  the  force  or  effect  of  any  of  the  said  cove- 
nants or  affect  any  other  right  or  remedy  of  the  lessor  in 
respect  of  any  default  in  the  performance  or  observance 
thereof,  and  this  provision  shall  not  exempt  any  such  trus- 
tees from  personal  liability  in  respect  of  any  trusts  herein  con- 
tained regarding  the  application  of  any  insurance  money  or  of 
any  moneys  paid  to  them  out  of  damages  received  for  such 
taking  as  is  hereinbefore  mentioned  (but  so  that  such  personal 
liability  of  any  trustee  shall  exist  only  as  to  breaches  of  trust 
which  occur  while  he  is  trustee)  and,  further,  that  this  provi- 
sion shall  not  exempt  from  personal  lial)ility  any  assignee 
of  this  lease  who  shall  not  be  a  trustee  under  said  indenture. 

454 


K 

ELECTRIC   COMPANIES 

Five  Per  Cent  First  Lien  Gold  Bond 

For  Value  Received  the Electric  Companies  will 

pay  to  J.  S.  or  bearer  One  Thousand  Dollars  in  gold  coin  of 
the  United  States  of  America  of  the  present  standard  of 
weight  and  fineness  on  the  1st  day  of  June  1925  at  the  office 

of  the Trust  Company  in  the  city  of  Boston  and  will 

also  pay  interest  thereon  in  like  gold  coin  at  the  rate  of  5  per 
centum  per  annum  semi-annually  on  presentation  and  sur- 
render of  the  annexed  coupons  at  the  time  and  place  therein 
mentioned. 

If  the  securities  pledged  for  the  payment  hereof  under  the 
indenture  hereinafter  mentioned  shall  be  sold  to  enforce  the 
security  of  the  said  indenture  as  therein  provided  the  princi- 
pal of  this  bond  shall  thereupon  become  due  and  payable. 

This  bond  is  one  of  a  series  of  bonds  of  the  promisor  issued 
or  to  be  issued  for  the  aggregate  principal  sum  of  not  exceed- 
ing $1,000,000  under  and  in  pursuance  of  and  all  equally 
secured  by  a  collateral  trust  indenture  dated  the  5th  day 
of  June  1905  whereby  all  shares  bonds  and  other  securities 
of  street  railway  corporations  and  other  property  now  owned 

or  hereafter  to  be  acquired  by  the Electric  Companies 

are  pledged  to  the Trust  Company  as  Trustee  for  the 

security  and  payment  of  the  said  bonds  to  which  indenture 
reference  is  hereby  made  for  a  statement  of  the  property 
pledged  the  nature  and  extent  of  the  security  the  rights  of 
the  holders  of  the  said  bonds  in  the  said  security  and  the 
terms  upon  which  the  said  bonds  are  secured. 

This  bond  is  redeemable  at  par  and  accrued  interest  on 
any  interest  payment  day  at  the  option  of  the  undersigned 
by  giving  notice  by  publication  for  six  successive  weeks  in  a 
newspaper  of  general  circulation  in  the  city  of  Boston  which 
notice  shall  state  the  time  and  place  of  such  payment.  In- 
terest on  this  bond  shall  cease  if  this  bond  is  not  presented 
for  payment  in  accordance  with  such  notice. 

The  contract  evidenced  by  this  bond  binds  only  the  funds 

455 


APPENDIX  OF  FORMS 

and  property  held  in  trust  by  the Electric  Companies 

and  neither  anj^  Trustee  or  Director  of  the  said  companies 
nor  the  holder  of  any  of  its  certificates  for  shares  shall  be 
held  to  any  personal  liabihty  under  or  by  reason  of  any  of 
the  provisions  hereof  such  habihty  if  any  being  expressly 
waived  by  the  acceptance  of  this  bond, 

Tliis  bond  shall  not  become  obligatory  until  it  shall  have 
been  authenticated  by  the  certificate  of  the  Trustee  under 
the  said  indenture  hereon  endorsed. 

In  Witness  Whereof  The Electric  Companies 

has  caused  these  presents  to  be  signed  in  its  behalf  by  the 
President  and  Secretary  of  its  Board  of  Directors  duly 
authorized  and  the  coupons  hereto  attached  to  be  authen- 
ticated by  the  facsimile  signature  of  its  Treasurer  as  of  the 
1st  day  of  June  1905. 

Electric  Companies. 

By  

President. 

Secretary. 

09  K  Coupon 

On  the  1st  day  of  June  19 .  .  .  the Electric  Companies 

will  pay  to  the  bearer  at  the  office  of  the Trust  Com- 
pany in  the  city  of  Boston  $25  in  gold  coin  of  the  United 
States  of  the  present  standard  of  weight  and  fineness  for 
six  months'  interest  on  its  5  per  cent  First  Lien  Gold  Bond 
No unless  such  bond  shall  have  been  sooner  redeemed. 

Trustee's  Certificate 

This  bond  is  one  of  a  series  of  bonds  referred  to  in  the 

within   mentioned   indenture  between   the   Electric 

Companies  and  the Company  as  secured  thereby. 

Trust  Company,  Trustee. 

By  

Secretary. 

For  value  received  the  undersigned  hereby  assigns  to 
the  within  bond  and  the  claim  repre- 
sented thereby  without  recourse  to  the  undersigned. 

(Signed)     J.  S. 
456 


CONSTITUTION 

Article  I 
Object  of  the  Club 
The Club  is  established  in  the  City  of 


for  the  promotion  of  social  intercourse  among  authors  and 
artists,  and  other  gentlemen  connected  with  or  interested 
in  literature  and  art. 

Article  II 
Officers 

Section  1.  The  oflScers  of  the  Club  shall  consist  of  a 
President,  two  Vice-Presidents,  a  Secretary,  a  Treasurer, 
ten  Governors,  and  a  Committee  on  Elections, 

The  President,  Vice-Presidents,  Secretary,  Treasurer, 
and  Governors  shall  constitute  the  Executive  Committee. 

Section  2.  The  President  shall  preside  at  all  meetings 
of  the  Club  and  of  the  Executive  Committee.  In  the  ab- 
sence of  the  President,  or  if  the  office  is  vacant,  one  of  the 
Vice-Presidents  shall  preside;  and  in  the  absence  of  the  Presi- 
dent and  both  Vice-Presidents  a  Chairman  shall  be  chosen 
by  vote. 

Section  3.  The  Secretary  shall  keep  a  record  of  the  pro- 
ceedings of  the  Club,  of  the  Executive  Committee,  and  of 
the  Committee  on  Elections;  shall  notify  new  members  of 
their  election;  shall  issue  all  notices  and  conduct  all  cor- 
respondence of  the  Club,  of  the  Executive  Committee,  and 
of  the  Committee  on  Elections,  except  where  otherwise  pro- 
vided. If  the  Secretary  is  absent  from  a  meeting,  a  Secre- 
tary pro  tempore  shall  be  chosen  by  vote.  The  Secretary 
shall  be  exempted  from  the  payment  of  the  annual  assess- 
ment. 

Section  4.  The  Treasurer  shall  collect  and  keep  all 
moneys  of  the  Club,  and  disburse  them  under  the  direction 
of  the  Executive  Committee.  He  shall  keep  the  accounts  of 
the  Club,  and  shall  make  a  report  of  its  financial  condition 

457 


APPENDIX   OF   FORMS 

at  each  annual  meeting,  and  shall  send  all  notices  and  con- 
duct all  correspondence  relating  to  financial  matters  of  the 
Club.  His  accounts  shall  be  audited  in  the  manner  provided 
by  Section  7  of  this  Article.  He  shall  be  exempted  from  the 
payment  of  the  annual  assessment,  and  shall  be  allowed  such 
sum  of  money  for  clerical  assistance  as  the  Executive  Com- 
mittee may  deem  expedient. 

At  the  end  of  each  fiscal  year  the  Treasurer  shall  report 
to  the  Executive  Committee  the  total  amount  of  cash  in 
bank  and  on  hand  and  accounts  receivable  less  a  sum  suf- 
ficient for  the  payment  of  all  current  bills  of  the  Club.  Out 
of  the  amount  then  remaining,  if  in  excess  of  four  thousand 
dollars,  the  sum  of  four  thousand  dollars  shall  be  reserved 
towards  the  running  expenses  of  the  succeeding  fiscal  year, 
and  the  balance  shall  be  invested  under  the  direction  of  the 
Executive  Committee  by  the  Treasurer  or  such  person  or 
persons  as  the  Executive  Committee  may  appoint,  in  such 
manner  and  subject  to  such  terms  and  conditions  as  the  Ex- 
ecutive Committee  may  determine.  The  fund  shall  be 
known  as  the  Reserve  Fund.  All  income  thereof  shall  be 
paid  to  the  Treasurer  to  be  applied  towards  the  general  ex- 
penses of  the  Club,  but  no  part  of  the  principal  of  the  Fund 
shall  be  spent  except  by  a  vote  of  the  Club,  on  the  recom- 
mendation of  the  Executive  Committee,  to  be  passed  at  a 
meeting,  notice  of  which  shall  be  given  at  least  ten  days 
prior  thereto,  and  shall  specify  the  amount  and  objects  of 
such  expenditure.  In  all  matters  not  herein  provided  for, 
the  Executive  Committee  shall  have  full  control  and  au- 
thority over  the  said  Fund,  and  the  securities  in  which  it 
may  be  invested. 

Section  5.  The  Executive  Committee,  seven  of  whom 
shall  constitute  a  quorum,  shall  hold  the  legal  title  to  all  the 
property  and  moneys  of  the  Club  in  trust  for  the  members, 
except  that  the  title  to  any  real  estate  which  may  be  ac- 
(luircd  may  be  taken  and  held  by  trustees  appointed  for  the 
{)urpose  by  the  Club.  The  Executive  Committee  shall  have 
the  management  and  control  of  the  Club,  and  may  make  or 
authorize  all  necessary  contracts  for  its  administration;  but 
the  Executive  Committee  .shall  have  no  authority  or  power, 
except  by  spe(;ial  vote  of  the  Club,  to  make  it  liable  for  any 
debt  beyond  the  amount  of  money  which  may  be  at  the  time 
in  the  Treasurer's  hands  and  not  needed  for  the  discharge  of 

458 


CONSTITUTION 

existing  debts  or  liabilities.  The  Executive  Committee  may- 
make  such  rules  and  regulations  for  the  management  of  the 
Club  and  for  the  use  of  the  club-house,  not  inconsistent  with 
the  Constitution  and  By-Laws,  as  it  may  deem  expedient; 
and  it  shall  appoint  from  its  own  number  a  House  Committee 
of  three,  and  commit  thereto  the  immediate  supervision  of 
the  club-house,  under  the  direction  and  control  of  the  Ex- 
ecutive Committee,  The  Executive  Committee  shall  have 
full  power  to  act  in  all  matters  not  otherwise  provided  for 
in  the  Constitution  or  By-Laws. 

Section  6.  The  Executive  Committee  shall  appoint 
from  its  own  number  an  Art  and  Library  Committee,  con- 
sisting of  five  persons,  who  shall  have,  under  the  direction 
and  control  of  the  Executive  Committee,  the  selection  and 
charge  of  all  pictures  and  other  works  of  art,  of  exhibitions, 
of  concerts,  of  lectures,  and  of  all  books,  periodicals,  maga- 
zines, and  newspapers  purchased  by  or  belonging  to  the 
Club.  The  Art  and  Library  Committee  may  appoint,  either 
from  its  own  number  or  from  the  members  of  the  Club,  one 
or  more  persons  to  take  immediate  charge  of  any  of  the 
matters  committed  to  it  under  the  provisions  of  this  section. 

Section  7.  The  Executive  Committee  at  its  first  meet- 
ing shall  appoint  from  the  Club  at  large  an  Auditing  Com- 
mittee of  three  members,  whose  duty  it  shall  be  to  audit 
the  Treasurer's  account,  either  in  person  or  by  an  expert, 
and  make  report  thereon  to  the  Executive  Committee  when 
so  requested. 

Section  8.  All  officers  of  the  Club  shall  be  elected  by 
ballot  at  the  annual  meeting  and  shall  hold  office  for  one 
year  from  the  first  day  of  June  next  ensuing,  and  until  their 
successors  shall  have  been  chosen  and  shall  have  accepted 
office;  except  the  Committee  on  Elections,  which  shall  hold 
office  for  the  period  hereinafter  provided.  In  case  of  a 
vacancy  in  the  office  of  President  or  Vice-President,  the 
Executive  Committee  may  call  a  special  meeting  of  the 
Club  to  fill  the  same.  All  other  vacancies,  except  such  as 
may  occur  in  the  Committee  on  Elections,  shall  be  filled  by 
the  Executive  Committee.  In  case  of  the  absence  or  dis- 
ability of  the  Treasurer  or  of  the  Secretary,  the  Executive 
Committee  shall  have  the  power  to  appoint  a  Treasurer  pro 
tempore  or  a  Secretary  pro  tempore  to  serve  during  such  ab- 
sence or  disability. 

459 


APPENDIX   OF   FORMS 

Article  III 

Elections 

Section"  1.  The  Committee  on  Elections,  nine  of  whom 
shall  constitute  a  quorum,  shall  consist  of  sixteen  members, 
of  whom  the  SecretaPk'  shall  be  one.  At  each  annual  meet- 
ing, five  new  members  shall  be  chosen  for  the  term  of  three 
years,  and  no  person,  except  the  Secret  an-,  ha^'ing  serv'ed 
as  a  member  of  said  Committee  shall  be  eHgible  to  serve 
again  until  the  expiration  of  one  year  from  the  end  of  his 
last  term  of  office.  Any  vacancies  that  may  occur  in  its 
membership  shall  be  filled  by  the  Committee. 

Section  2.  All  elections  to  membership  in  the  Club  shall 
be  made  by  the  Committee  on  Elections  at  stated  meetings, 
held  for  that  purpose,  either  by  secret  or  open  ballot  as  the 
Committee  may  determine,  and  one  negative  vote  in  five 
shall  exclude  the  candidate  voted  upon. 

Section  3.  Any  man  of  the  age  of  twenty-one  years 
may  be  proposed  for  membership  in  the  Club  by  two  mem- 
bers not  members  of  the  Committee  on  Elections,  who  shall 
state  whether  he  is  proposed  as  a  resident  or  a  non-resident 
member,  and  shall  certify  under  their  own  hands  that  they 
know  the  candidate  personally,  and  beheve  liim  a  fit  person 
to  be  a  member.  The  name  of  the  candidate  thus  proposed 
shall  be  posted  in  one  or  more  prominent  places  in  the  club- 
house, with  the  names  of  his  proposers,  the  date  of  posting, 
and  his  place  of  residence  if  he  be  a  candidate  for  non- 
resident membership  other  than  an  officer  of  the  United 
States  Army  or  Xav3^  No  name  shall  be  acted  upon  until 
it  has  been  posted  at  least  fourteen  daj's.  No  elections  shall 
take  place  in  the  months  of  July,  August,  and  September, 
and  not  more  than  ten  resident  members  shall  be  elected  in 
any  calendar  month. 

Section  4.  Each  candidate  elected  to  membership  shall, 
by  a  notice  sent  to  his  address  as  given  by  his  proposers,  be 
notified  by  the  Secretary  of  his  election  and  of  the  amount 
of  the  entrance  fee  and  annual  assessment  to  be  paid  by 
him;  but  he  shall  not  be  entitled  to  any  of  the  privileges  of 
membership  until  he  has  paid  to  the  Trea.surer  the  entrance 
fee  and  the  proportionate  part  of  the  annual  assessment  for 
the  current  year,  fixed  by  the  By-Laws.    If  the  amount  due 

460 


CONSTITUTION 

is  not  paid  within  sixty  days  after  said  notification  has  been 
sent,  his  election  may  be  cancelled  by  the  Executive  Com- 
mittee. 

Section  5.  No  candidate  rejected  by  the  Committee  on 
Elections  shall  be  proposed  again  witliin  six  months  there- 
after. 

Section  6.  The  number  of  members  of  the  Club  shall 
not  exceed  four  hundred  and  fifty  resident  members,  exclu- 
sive of  the  Secretary  and  Treasurer  and  those  exempted 
from  payment  of  dues  under  Article  I,  Section  4,  and  Sec- 
tion 7,  of  the  By-Laws,  and  one  hundred  non-resident  mem- 
bers, exclusive  of  officers  of  the  United  States  Army  or  Navy 
and  those  exempted  from  payment  of  dues  under  Article  I, 
Section  4,  of  the  By-Laws.  The  number  of  non-resident 
members  who  are  officers  of  the  United  States  Army  or 
Navy  shall  not  exceed  fifty,  exclusive  of  those  who  are  ex- 
empted from  payment  of  dues  under  Article  I,  Section  4,  of 
the  By-Laws.  In  case  the  number  of  paying  members  shall 
by  the  return  of  absentees  or  by  the  termination  of  exemp- 
tion from  payment  of  dues  under  Article  I,  Section  4,  of  the 
By-Laws  be  increased  above  the  respective  Hmit  of  member- 
ship in  any  group  by  this  section  prescribed,  no  new  mem- 
ber in  that  group,  the  number  of  members  in  which  has  thus 
been  increased  above  the  limit  by  this  section  prescribed, 
shall  be  chosen  until  such  number  shall  be  reduced,  by  resig- 
nation or  otherwise,  below  such  limit. 

Section  7.    Candidates  who  do  not  reside  or  have  a  usual 

place  of  business  or  study  within  thirty  miles  of , 

and  officers  of  the  United  States  Army  or  Navy,  irrespective 
of  place  of  residence,  may  be  elected  non-resident  members 
of  the  Club;  provided  that  it  is  set  forth  in  the  proposal 
nominating  the  candidate  that  he  is  nominated  for  non- 
resident membership.  Non-resident  members,  except  officers 
of  the  United  States  Army  or  Navy,  shall  pay  one-half  en- 
trance fees.  Officers  of  the  Army  and  Navy  shall  pay  no 
entrance  fee.  All  non-resident  members  shall  pay  one-half 
of  the  annual  assessment.  They  shall  not  be  entitled  to 
vote  or  hold  office,  but  shall  have  all  the  other  rights  and 
privileges  of  Jiembers,  except  that  in  the  event  of  the  dis- 
solution of  the  Club  the  interest  of  a  non-resident  member 
elected  after  January  1,  1908,  in  the  property  and  assets 
shall  be  a  half  share  only.    Whenever  a  non-resident  mem- 

461 


APPENDIX   OF  FORMS 

ber  shall  cease  to  belong  to  that  class  by  residing  or  having 
a  usual  place  of  business  or  study  within  thirty  miles  of 
he  shall  thenceforth  be  classed  as  a  resident  mem- 
ber, shall  then  pay  the  pro  rata  balance  of  the  annual  assess- 
ment for  resident  members,  and  thereafter  pay  the  full  annual 
assessment,  and  shall  pay  to  the  Treasurer  an  amount  equal 
to  the  difference  between  his  original  entrance  fee  and  the 
entrance  fee  for  resident  members  at  the  time  of  his  admis- 
sion as  a  non-resident  member;  and  failure  to  pay  said  sums 
shall  be  considered  a  failure  to  pay  entrance  fees  and  assess- 
ment dues.  The  Executive  Committee  may,  on  the  applica- 
tion of  any  resident  member,  place  him  in  the  class  of 
non-resident  members  upon  being  satisfied  that  he  is  duly 
quahfied,  his  privilege  to  begin  on  the  first  day  of  April  next 
succeeding  the  date  of  his  application. 

Article  IV 
Resignation  and  Forfeiture  of  Membership 

Section  1.  Any  member  desiring  to  resign  from  the 
Club  shall  notify  the  Secretary  in  writing  of  his  wish,  and 
the  acceptance  of  his  resignation  by  the  Executive  Com- 
mittee shall  terminate  his  membership.  No  resignation 
shall  exempt  from  payment  of  any  debt  which  may  be  due 
the  Club  at  the  time,  unless  the  Executive  Committee  deems 
it  right  to  remit  such  debt. 

Section  2.  If  any  member  fails  to  pay  any  assessment 
or  other  debt  within  two  months  after  the  same  is 
due  and  payable,  and  if  he  has  been  so  notified,  the  Ex- 
ecutive Committee  may  declare  his  membership  forfeited; 
and  in  that  case  the  Secretary  shall  notify  him  of  such 
action. 

Section  3.  Any  three  members  may  present  to  the 
Executive  Committee  written  charges  signed  by  themselves 
impugning  the  character  or  conduct  of  any  other  member; 
and  if  it  appears  to  the  Executive  Committee  on  inquiry, 
after  notice  to  the  member  so  complained  of  and  an  oppor- 
tunity given  him  to  be  heard  in  his  defence,  that  his  conduct 
is  deserving  of  censure  or  has  endangered  or  is  likely  to  en- 
danger the  good  order,  welfare,  or  character  of  the  Club,  or 
is  n  violation  (^f  the  Constitution,  By-Laws,  or  regulations 
of  the  Club,  the  Committee  may,  by  a  vote  of  a  majority  of 

462 


CONSTITUTION 

all  the  members  thereof,  either  admonish  him,  request  his 
resignation,  or  declare  his  membership  forfeited.  A  member 
expelled  shall  have  the  right  to  appeal  to  the  Club  within 
one  month  after  being  notified  of  the  action  of  the  Com- 
mittee; and  upon  receiving  written  notice  of  the  appeal,  the 
Executive  Committee  shall  call  a  special  meeting  of  the 
Club  to  be  held  not  more  than  four  weeks  from  the  date  of 
the  call,  for  the  purpose  of  hearing  such  appeal.  If  a  major- 
ity of  the  members  present  at  such  meeting  shall  on  secret 
ballot  reverse  the  action  of  this  Committee,  the  person  ap- 
pealing shall  be  restored  to  his  privileges  as  a  member  of 
the  Club;  but  until  such  reversal  he  shall  not  be  entitled 
to  use  the  club-house  or  enjoy  any  other  privilege  of  a 
member. 

Section  4.  For  any  misconduct  in  the  club-house  or 
infraction  of  the  Constitution,  By-Laws,  or  regulations  of 
the  Club,  the  proceedings  provided  for  in  Section  3  may  be 
begun  by  the  Executive  Committee. 

Section  5.  On  the  resignation  or  death  of  a  member,  or 
any  forfeiture  of  membership  by  a  member  under  the  Con- 
stitution, all  his  right  and  interest  in  the  property  of  the 
Club  shall  cease. 

Article  V 

Meetings 

Section  1.  The  annual  meeting  of  the  Club  shall  be 
held  on  the  last  Saturday  of  April,  and  special  notice  thereof 
shall  be  sent  to  all  members  of  the  Club.  There  shall  also 
be  meetings  for  business  and  social  intercourse  on  the  last 
Saturday  of  February  and  of  March,  and  for  social  intercourse 
and  the  reception  of  strangers  at  such  other  times  as  the 
Executive  Committee  may  determine;  provided  that  when 
the  last  Saturday  of  any  month  falls  upon  a  legal  holiday, 
the  meeting  shall  be  held  upon  the  Saturday  next  pre- 
ceding. 

Section  2.  Special  meetings  may  be  called  by  the  Exec- 
utive Committee,  or  by  the  President,  and,  upon  the 
written  request  of  five  members,  shall  be  so  called  by 
sending  written  notice  thereof  ten  days  beforehand  to 
each  member,  and  posting  a  copy  of  such  notice  in  the 
club-house. 

463 


APPENDIX   OF   FORMS 

Section  3.  Thirty  persons  shall  constitute  a  quorum  for 
the  transaction  of  business  at  an}-  meeting  of  the  Club. 

Section  4.  Xo  stranger  shall  be  present  at  any  meeting 
during  the  transaction  of  business. 

Article  VI 
Amendments  of  Constitution  and  By-Laws,  and  Notice. 

Section  1.  Amendments  of  the  Constitution  and  By- 
Laws  must  be  made  at  a  regular  meeting,  or  at  a  special 
meeting  called  for  the  purpose;  but  any  such  proposed 
amendment  shall  be  posted  in  one  or  more  prominent  places 
in  the  club-house  at  least  ten  days  before  such  regular  or 
special  meeting.  No  amendment  of  the  Constitution  shall 
be  made  except  by  vote  of  two-thirds  of  the  members  present. 

Section  2.  Unless  otherwise  pro\'ided  for,  any  notice  to 
be  given  to  a  member  under  this  Constitution  or  under  the 
Bj'-Laws  shall  be  deemed  sufficient  if  sent  post-paid  to  the 
last  address  given  to  the  Secretary''  by  said  member,  or  in 
default  of  such  address  if  left  in  the  letter  box  in  the  Club. 


BY-LAWS 

Article  I 

Entrance  Fee,  Annual  Assessment,  and  Other  Indebtedness 

Section  1.  Resident  members  shall  pay  an  entrance 
fee  of  fifty  dollars.  Xon-resident  members,  except  officers  of 
the  Army  and  Xa^y,  shall  pay  an  entrance  fee  of  twenty- 
five  dollars.  The  annual  assessment  for  all  resident  mem- 
bers shall  be  sbrty  dollars.  The  annual  assessment  for  all 
non-resident  members  shall  be  thirty  dollars.  A  person 
joining  the  Club  after  the  beginning  of  the  fiscal  year 
shall  pay  the  entrance  fee  and  a  proportionate  part  of 
the  assessment  for  the  unexpired  part  of  the  current  year, 
reckoning  from  the  first  day  of  the  month  in  which  his  elec- 
tion occurs. 

Section  2.  The  assessment  for  each  3'ear  shall  be  due 
and  paj'able  on  the  first  day  of  April;  but  any  resident 
memljer  or  any  non-resident  member  who  is  an  officer  of  the 
United  States  Army  or  Navy  may  pay  one-half  of  his  as- 

464 


CONSTITUTION 

sessment  on  the  first  day  of  April,  and  one-half  on  the  first 
day  of  October. 

Section  3.  Members  who  have  not  paid  their  annual 
assessment  or  any  semi-annual  instalment  thereof  within 
thirty  days  after  the  same  shall  be  due  shall  be  notified  of 
the  fact,  and  that  their  names  will  be  posted  in  the  club- 
house at  the  expiration  of  fifteen  days  from  the  date  of  said 
notice,  if  payment  has  not  then  been  made. 

Section  4.  The  Executive  Committee  may  remit  the  as- 
sessment of  any  member  if  it  thinks  it  right  or  expedient 
so  to  do. 

Section  5.  On  the  first  day  of  each  month,  or  as  soon 
thereafter  as  may  be  practicable,  there  shall  be  sent  to  each 
member  notice  of  his  indebtedness  on  the  last  day  of  the 
preceding  month;  and  if  the  same  is  not  paid  on  or  before 
the  fifteenth  day  of  the  month,  the  name  of  each  member  so 
in  default,  together  with  the  amount  due,  shall  be  posted, 
and  he  shall  be  refused  further  credit  until  his  indebtedness 
is  discharged. 

In  case  any  such  indebtedness  shall  not  be  discharged  be- 
fore the  end  of  said  month,  a  second  notice  shall  be  sent  to 
the  member  in  default,  notifying  him  thereof,  and  that  in 
case  he  continues  in  such  default  for  fifteen  days  from  the 
end  of  said  month,  he  shall  be  excluded  from  all  privileges 
of  the  Club  until  such  indebtedness  is  paid;  and  such  mem- 
ber shall,  upon  the  expiration  of  such  fifteen  days,  be  so 
excluded,  and  notice  to  that  effect  shall  be  posted. 

Section  6.  The  Executive  Committee  may  at  any  time 
limit  or  suspend  the  credit  of  any  member. 

No  further  credit  shall  be  given  when  a  member's  indebted- 
ness (other  than  assessment)  shall  amount  to  one  hundred 
dollars. 

Section  7.  A  resident  member  intending  to  be  absent 
from  the  State  for  a  year  or  more,  and  notifying  the  Secre- 
tary in  writing  to  that  effect,  shall  be  exempt  from  the  pay- 
ment of  the  pro  rata  portion  of  the  dues  covering  the  period 
of  his  absence  for  such  year  or  more,  and  a  non-resident 
member  who  is  an  officer  of  the  United  States  Army  or  Navy, 
receiving  orders  for  duty  outside  of  the  State  and  notifying 
the  Secretary  in  writing  to  that  effect,  shall  be  exempt  from 
the  payment  of  the  pro  rata  portion  of  the  dues  covering 

465 


APPENDIX  OF  FORMS 

any  period  of  absence  for  three  months  or  more  when  out- 
side of  the  State  under  such  orders,  such  exemptions  to  be 
allowed  in  such  manner  as  the  Executive  Conmaittee  shall 
determine. 

Article  II 

Cluh-House 

Section  1.  The  club-house  shall  be  open  for  the  recep- 
tion of  members  every  day,  under  such  rules  and  regulations 
as  the  Executive  Committee  may  prescribe. 

Section  2.  No  game  of  any  kind  shall  be  plaj^ed  in  the 
club-house  between  midnight  of  Saturday  and  midnight  of 
Sunday. 

Section  3.  Memorandum  checks  must  be  signed  for  all 
unpaid  bills  or  charges  before  the  member  or  guest  incurring 
them  leaves  the  club-house;  and  it  shall  be  the  duty  of  the 
Superintendent  to  report  any  infraction  of  this  rule  at  once 
to  the  Treasurer. 

Section  4.  No  member  or  visitor  shall  give  any  money 
or  gratuity  to  any  servant  of  the  Club,  and  no  servant  of 
the  Club  shall  be  employed  by  any  member  on  any  business 
of  his  own  out  of  the  club-house. 

Section  5.  No  picture  or  other  work  of  art  shall  be  placed 
in  the  club-house  except  by  consent  of  the  Art  and  Library 
Committee. 

Section  6.  No  report  shall  be  made  or  account  pub- 
lished of  any  proceeding  of  the  Club,  or  of  anything  which 
takes  place  in  the  club-house,  except  by  special  permission 
of  the  Executive  Committee. 

Section  7.  Any  destruction  of  or  injury  to  the  property 
of  the  Club  or  any  work  of  art  or  curiosity  lent  to  it  shall  be 
paid  for  by  the  member  who  shall  have  caused  the  same; 
and  the  amount  to  be  paid  shall  be  determined  by  the  Exec- 
utive Committee. 

Article  III 

Exhibitions 

Exhibitions  held  in  the  club-house  may  be  open  to  per- 
sons not  members  of  the  Club,  under  such  regulations,  on 
.such  days,  and  at  such  hours,  as  the  Art  and  Library  Com- 
mittee may  determine. 

466 


CONSTITUTION 

Article  IV 
Strangers  and  Temporary  Members 

Section  1.  Persons  residing  more  than  thirty  miles  from 
and  having  no  place  of  business  therein,  may  be  intro- 
duced by  members  to  the  club-house  for  a  single  day,  or  to 
any  meeting  of  the  Club,  except  during  the  transaction  of 
business,  either  personally,  or  by  card  of  introduction;  and 
the  Executive  Committee,  by  any  of  its  members,  may  invite 
such  a  person,  at  the  request  of  any  member,  to  use  the 
club-house  for  a  fortnight.  The  Executive  Committee  may, 
by  vote,  extend  such  invitation  to  any  such  person  for  an 
additional  period  not  exceeding  one  month;  and  between 
any  two  meetings  of  the  Committee,  this  power  may  be 
exercised  by  the  President,  Secretary,  or  the  Chairman  of 
the  House  Committee. 

No  member  shall  be  entitled  to  invitations  for  more  than 
two  persons  at  the  same  time;  and  no  person,  after  the 
period  of  his  invitation  or  its  extension  shall  have  expired, 
shall  be  invited  again  within  three  months. 

Section  2.  The  Executive  Committee  may,  by  vote, 
extend  the  hospitality  of  the  Club  to  distinguished  strangers, 
or  persons  of  eminence,  for  such  period  as,  in  its  discretion, 
it  may  determine.  In  the  interval  between  the  meetings  of 
the  Committee,  such  an  invitation  may  be  issued  by  the 
President  or  Secretary  of  the  Club,  upon  the  written  ap- 
proval of  not  less  than  five  members  of  the  Executive  Com- 
mittee. 

Section  3.  The  Executive  Committee  shall  have  power, 
on  the  written  recommendation  of  two  or  more  members  of 
the  Club,  to  admit  to  the  use  of  the  Club  for  such  period  as 
the  Executive  Committee  may  determine  any  person  eligible 
to  non-resident  membership  and  having  a  temporary  resi- 
dence or  place  of  business  within  thirty  miles  of The 

privileges  thus  granted  may  in  any  case  be  terminated  at 
the  discretion  of  the  Executive  Committee.  Any  person 
admitted  under  this  section  to  the  use  of  the  Club  for  any 
period  shall  pay  in  advance  dues  for  the  whole  of  such 
period  at  the  rate  of  five  dollars  per  month.  He  shall  pay  no 
entrance  fee,  shall  have  no  vote,  and  in  the  event  of  the  dis- 
solution of  the  Club  shall  have  no  interest  in  its  property. 

467 


APPENDIX  OF  FORMS 

Section  4.    A  person  residing  in or  within  thirty 

miles  of or  having  a  place  of  business  therein,  may 

be  introduced  to  the  club-house  for  one  day  by  any  member 
or  members,  not  oftener  than  once  in  three  months,  except 
to  an  entertainment  in  a  private  room,  and  to  any  meeting 
of  the  Club,  not  oftener  than  once  a  year. 

Section  5,  A  member  introducing  a  person  to  the  club- 
house, or  requesting  an  invitation  for  one,  shall  enter  his  name 
at  the  time  in  a  visitors'  book  kept  for  the  purpose,  with  his 
owm  name  and  the  date  of  introduction.  Where  the  person 
is  introduced  by  card,  or  the  invitation  is  requested  by  letter, 
this  entry  shall  be  made  by  the  clerk. 

Section  6.  In  case  of  the  violation  by  any  member  of 
any  of  the  preceding  sections  of  this  Article,  it  shall  be  the 
duty  of  the  House  Committee,  upon  being  informed  of  such 
violation,  to  call  the  attention  of  the  member  to  the  section 
violated. 

Section  7.  No  visitor  or  guest  shall  be  permitted  to 
introduce  any  stranger  to  the  club-house;  and  the  Executive 
Committee  shall  have  the  power  to  exclude  any  person, 
not  a  member,  from  the  club-house,  if  it  deems  it  expedient 
so  to  do. 

Section  8.  A  member  introducing  or  requesting  an  in- 
troduction for  any  stranger  to  the  club-house  shall  be  per- 
sonally responsible  for  all  charges  and  liabilities  incurred  by 
him. 

Article  V 

Nomination  of  Officers  and  Annual  Report 

Section  1.  At  the  regular  meeting  of  the  Club  next 
preceding  the  annual  meeting,  a  committee  of  not  less  than 
five  shall  be  appointed  to  nominate  officers  for  the  ensuing 
year.  The  names  of  the  persons  so  nominated  shall  be  posted 
in  the  club-house  at  least  ten  days  before  the  annual  meet- 
ing, and  the  Secretary  shall  notify  members  of  the  Club  of 
such  nominations. 

Any  ten  or  more  members  desiring  to  make  a  nomina- 
tion for  office  may  at  any  time  not  less  than  five  days  before 
the  annual  meeting  send  such  nomination  in  ^vriting  signed 
by  them  to  the  Secretary,  who  shall  immediately  post  the 
same  in  the  club-house  and  shall  notify  members  of  the 

4G8 


CONSTITUTION 

Club  of  such  nomination,  together  with  the  names  of  the 
signers.  No  person  not  nominated  as  provided  in  this  sec- 
tion shall  be  a  candidate  for  office  at  the  annual  meeting 
against  a  person  so  nominated. 

Section  2,  At  the  annual  meeting,  the  Executive  Com- 
mittee shall  submit  a  written  report  of  the  condition  of  the 
Club  and  of  its  proceedings  during  the  previous  year,  with 
such  facts  and  suggestions  as  it  may  deem  it  expedient  to 
lay  before  the  Club. 


469 


INDEX 

[references  are  to  paoes.] 


A. 
ACCOMMODATION 

endorsement  by  officers  of  association  for  profit,  88  note. 

ACTION 

for  libel  by  members,  97,  203  note. 
for  subscriptions,  104. 

ACTIONS 

at  law,  between  members,  102,  103. 
by  shareholders.  111. 

ADMISSION 

of  members  of  non-profit  association,  208. 

ADVENTURE.     See  Joint  Adventure. 

AGENCY, 

dealers  through  common  agent,  5,  197. 
loaned  servants,  51. 

AGENT, 

for  mining  partnership,  authority  of,  129  note. 
MabiUty  of,  for  excess  of  authority,  136. 

AGENTS, 

ratification  of  acts  of,  277,  278. 

ASSIGNMENTS, 

for  the  benefit  of  creditors,  151. 

ASSOCIATION 

to  hold  not  deal  in  land  not  a  partnership,  120  note. 
to  speculate  in  investments,  75. 

ASSOCIATIONS, 

broad  purposes  of,  72. 

classification  of,  4. 

classified  according  to  cohesion,  5. 

classified  according  to  pecuniary  purposes,  4. 

for  profit,  4,  8. 

for  profit  and  non-profit,  distinction  between,  37. 

for  profit,  application  of  law  of  partnership  to,  76. 

for  profit  distinguished  from  tenancy  in  common,  66. 

471 


INDEX 

ASSOCIATIONS  —  Continued. 

and  partnerships,  distinction  between,  3. 

for  profit  held  partnerships,  38,  40,  100,  114,  120  note. 

for  profit,  property  rights  in,  78. 

incorporation  of,  27. 

intermediate  between  corporation  and  partnership,  6,  38,  58,  65,  73, 

200  note,  205. 
regulation  of,  139-143. 
rules  as  contracts,  272. 

B. 

BANKRUPTCY. 

unincorporated  company,  2,  172. 

BENEFICIARY. 

liabiUty  to  creditors,  157. 
representation  of,  by  trustee,  164. 
right  of,  to  accounting,  162. 
right  of,  to  information,  162. 

See  also  Cestui  que  trust;  Trustee. 

BENEFIT  SOCIETIES,  5,  201. 
increase  in  assessments,  271. 
liability  of  members,  283. 

nature  of  members'  interest  in  insurance,  202  note. 
nature  of  obUgation  of,  to  members,  283. 

BEQUESTS, 

to  unincorporated  associations,  247,  248. 

BONDHOLDERS, 

under  trust  mortgages,  153. 

must  proceed  first  through  trustee,  166. 

BOYCOTT,  288. 

BUBBLE  ACT,  8. 

BUSINESS  ENTERPRISE,  70. 

BY-LAWS, 

of  non-profit  associations,  231. 

C. 
CAR  TRUSTS,  41,  152. 

CERTIFICATES   FOR  SHARES, 
nature  of,  106. 

CERTIORARI, 

to  church  court,  228  note. 

CESTUI  QUE   TRUST. 

nature  of  interest  of,  81-87. 
rights  of,  46. 

See  also  Beneficiary;  Trustee. 

472 


INDEX 

CHURCH  TRIBUNALS, 

effect  of  decision  of,  263-267. 

CLOSED  SHOP, 

strike  to  enforce,  288. 

"CLUBS," 

formed  to  evade  liquor  laws,  212. 

COMBINATION 

of  employers  and  employees,  154,  285. 

COMMON  AGENT, 

dealers  through,  5,  197. 

COMMUNISITIC  SOCIETIES.    See  Socialistic  Communities. 

COMPANY, 

definition  of,  1. 

CONSTITUTIONALITY 

of  regulation  of  associations,  140. 

CONTESTED   ELECTIONS, 

in  non-profit  associations,  233. 

CONTRIBUTION,  105,  111  note,  112  note,  122  note,  274. 

CONTROL  BY  MAJORITY  OF  SHAREHOLDERS.    See  Major- 
ity Rule. 

COOPERATIVE   STORES,  9. 

CORPORATIONS 
as  associations,  1. 

and  associations,  distinction  between,  2. 
and  partnership,  distinction  between,  101. 
de  facto,  26.     See  also  Joint  Stock  Associations. 

COURTS.    See  Federal  Courts. 

CREDITORS, 

committee,  compensation  of,  164  note. 
remedies  of,  132. 

See  also  Levy;  Member,  Liability  op;  Shareholder,  Liabilitt 
of;  Trustee,  Liability  op. 


D. 
DECLARATION, 

of  intention,  62. 

DEFECTIVE   INCORPORATIONS,  4,  5,  26,  191. 

DEFINITION  OF  ASSOCIATION,  1,  3. 

DELECTUS  PERSONS, 
none  in  associations,  114. 
none  in  mining  partnership,  10,  92  note. 

473 


INDEX 

DESCENT  OF  PARTNT:RS'   INTEREST, 
in  firm  realty,  79. 

DE^^SE, 

to  unincorporated  association,  246. 

DIRECTORS, 

election  of,  18  note. 

power  to  dedicate  land,  134  note. 

DISSOLUTION, 

by  death  of  shareholder,  114,  118,  119. 
by  transfer  of  shares,  111,  112,  114. 
does  not  terminate  habihty  of  shareholders,  109. 
of  joint  stock  association,  17,  18  note. 
of  non-profit  association,  207,  2.51. 
notice  of,  by  retiring  shareholder,  110,  112  note. 
See  also  Wixding  Up. 

DmDENDS, 

apportionment  between  life  tenant  and  remainderman,  15  nof-e, 

120  note. 
duty  to  declare  in  joint  stock  associations,  18  note. 

DORMANT   PARTNERS,  110. 

'DO^yEB., 

in  lands  of  associations,  79.  ^ 

DUES, 

increase  of,  269,  271. 

E. 

EARLY   COMPANIES,  8. 

ELECTION, 

of  officer,  proof  of,  91. 

of  trustees,  effect  of,  on  nature  of  organization,  48,  51,  64. 

EMPLO\'ERS'   ASSOCIATIONS, 
nature  of,  5,  202. 
liabiHty  of  members  of,  285. 

EQUITABLE   CON\^RSION, 

as  apphed  to  shareholder's  interest  in  realty,  85-87. 

ESTOPPEL, 

to  deny  membership,  107. 

EXECUTOR, 

of  deceased  shareholder,  liability  of,  119. 

EXPULSION, 

damages  for  wrongful,  224. 
of  members  of  non-profit  associations,  213-224. 
of  members  of  non-profit  association,  distinction  between  incor- 
porated and  unincorporated,  216. 
of  members,  effect  of  property  rights,  220,  221. 

474 


INDEX 

EXPULSION  —  Continued. 
of  members,  hearing,  215. 
of  members,  notice  of  hearing,  218. 
^  of  members,  socialistic  community,  253  note. 

F. 

FARMERS'   TELEPHONE   LINES, 
nature  of,  5,  9,  202,  203,  211. 

FEDERAL  COURTS, 

jurisdiction  in  suits  to  which  associations  are  parties,  2  note,  19. 
jurisdiction  of  trustee,  165. 

FIDUCIARY   OBLIGATION, 

of  members  of  associations,  273. 
of  members  of  syndicates,  183  note. 

FOREIGN   ASSOCIATIONS, 

doing  business  outside  state  of  organization,  15  7ioie. 

FOREIGN   TRUSTEE, 

doing  business  outside  the  state  of  appointment,  168. 

FORMAL  ASSOCIATIONS, 
for  profit,  4,  7,  28. 
for  profit,  law  applicable  to,  39. 

FRATERNAL  ORDERS, 
nature  of,  5,  37,  200. 

H. 
HEARING, 

before  expulsion,  from  non-profit  association,  215. 

HOLDING   COMPANIES,  44,  73. 

I. 

INCORPORATED  AND  UNINCORPORATED 

non-profit  associations,  207,  208. 

INCORPORATION, 

of  association,  effect  on  title  to  property,  244,  245. 

INDICTMENT, 

for  larceny  from  association,  3  note. 

INFORMAL  ASSOCIATIONS 

for  profit,  4,  8. 

for  profit,  law  applicable  to,  36. 
for  profit,  membership  in,  77. 
for  profit,  partner  to  actions,  94. 
for  profit,  pleadings,  94. 

INHERITANCE   TAX, 

on  shares,  142. 

on  non-resident  shareholder,  81  note. 

475 


INDEX 

INSURANCE, 

what  is  transacting  business,  174  note. 

INSURERS,   LLOYDS.    See  Lloyds  Insurance. 

INTERNAL  AFFAIRS, 

of  non-profit  associations,  interf erence of  courts  with,  227. 
courts  will  not  interfere  unless  property  or  civil  right  involved,  274. 

IRRIGATION   DITCHES,  10. 


JOINT  ADVENTURE, 

definition  of,  6,  186,  204. 

JOINT   STOCK  ASSOCIATIONS,  12. 
actions  by  and  against,  15  note,  16. 
citizenship  of,  14  note,  15,  16. 
consohdation  of,  17  note,  18  note. 
dissolution  of,  17,  18  note. 

doing  business  outside  the  state  of  organization,  15  note. 
held  corporations,  14  note,  15,  18. 
held  partnerships,  13,  14. 
hability  of,  to  member,  17  note. 
limitation  of  liabihty,  131. 
shares  of,  personal  property,  13  note. 

See  also  Limited  Partnerships. 

JOINT   STOCK   COMPANY, 

distinguished  from  corporation,  3  note. 

JOINT   TENANTS, 

distinguished  from  tenants  in  common,  193. 

JOINT   VENTURE.     See  Joint  Adventure. 

JURISDICTION., 

of  tribunals  of  associations,  right  of  civil  courts  to  determine,  229. 
See  Federal  Courts. 


LARCENY, 

from  association,  indictment  for,  249  note. 

LENDERS, 

held  partners,  11  note. 

LEVY, 

on  property  of  joint  stock  associations,  17. 

LIABILITY, 

of  agent  for  excess  of  authority  or  fraud,  136. 
of  members  of  association  for  profit,  112  note. 
of  shareholders  in  contract,  98. 
of  shareholders  in  tort,  99. 

476 


INDEX 

LIABILITY  —  Continued. 

of  shareholder  for  prior  debts,  109. 

of  shareholders,  limitation  of.    See  Limitation";  Shareholders, 

of  shareholders,  termination  of,  107. 

LIBEL, 

action  by  members  of  association  for  profit,  97. 

action  by  members  of  non-profit  association,  203  note. 

LIFE  TENANT  AND   REMAINDERMAN, 

apportionment  of  principal  and  income  between,  15  note,  80  note, 
81  note,  120  note. 

LIMITED   PARTNERSHIPS,  25. 

LIMITED   PARTNERSHIP  ASSOCIATIONS, 
in  Pennsylvania,  nature  of,  19. 
citizenship  of,  19. 
dissolution  of,  21  note. 
shares  in,  23. 

liability  of  members,  20,  21. 

See  also  Joint  Stock  Associations;  Partnership  Associations 
Limited. 

LLOYDS   INSURANCE,  5,  171. 

actions  on  poUcies,  177. 
association,  172. 

LLOYDS   INSURERS, 

independent  contractors,  175-177. 
liability  of  attorney  of,  178,  179,  180. 
lim.itations  on  liability,  181. 
partners,  12,  174. 

LORD  BOVILL'S  ACT,  11  note. 

M. 
MANDAMUS, 

not  proper  remedy  for  reinstatement,  222. 

MAJORITY   RULE,  53,  206,  233,  236  note,  250  note,  262. 

MAJORITY   SHAREHOLDERS, 
obligations  to  minority,  92  note. 

MEETINGS, 

of  non-profit  associations,  234  note. 
notice  of,  235,  264  note. 

MEMBERS, 

actions  at  law  between,  102,  103. 

action  for  libel  by,  97. 

buying  with  knowledge,  liable  for  debts,  89  note. 

contribution,  105,  111  note,  112  note,  274. 

have  no  right  to  pay  for  services,  94. 

477 


INDEX 

MEMBERS  —  Continued. 

duty  to  exhaust  remedies  within  the  association  before  appeal  to 

courts,  224. 
estopped  to  deny  membership,  107. 
expulsion  of.    See  Expulsion. 
Uability,  exhaustion  of  assets  of  association,  281. 
habihty  of,  effect  of  withdrawal,  281. 
habiUty  of,  benefit  society,  283. 
habihty  for  torts  of  fellow  member,  282. 
habihty  of,  to  third  parties,  275-288. 
habihty  limited  bj'  agreement,  280. 
meetings  of,  234  note,  264  7iote. 
mutual  obligations  of,  93,  273. 
fiduciarj'  obhgation  of,  273. 
powers  of,  associations  for  profit,  88,  92. 
powers  of,  mining  partnership,  92. 
property  rights.     See  Property. 
remedies  of,  procedure,  275. 
retired.    See  Retired  Members. 
right  to  compel  le\'j'  of  assessment,  274. 
right  to  contribution.    See  CoNTRiBrTiox. 
rights  of,  Shaker  after  leaving  society  sues  for  his  labor,  253  note. 
withdrawal,  effect  of,  205. 

MEMBERSHIP, 

in  informal  associations  for  profit,  77. 
in  non-profit  associations,  204,  211,  221. 
is  a  question  of  fact,  208  note. 
quahfications  for,  210, 
transfer  of,  206. 

MERGER, 

of  cause  of  action  by  judgment  against  member,  102. 

MIXING   PARTNERSHIP,  4,  10. 
authority  of  agents,  129  note. 
distinguished  from  tenancies  in  common,  68. 
include  irrigation  ditches,  70. 
includes  oil  drihing,  69. 
includes  smelting  firm,  69. 
may  have  delectus  personae,  118. 
powers  of  members,  92. 
winding  up,  122  note. 

MINORITY   SHAREHOLDERS, 

bill  against  trustee,  134  riote. 

See  Majority  Rule. 
MORTGAGES, 

securing  bonds,  153. 

MUTUAL  BENEFIT  SOCIETIES.    See  Benefit  Societies. 

MUTUAL   INSURANCE   SOCIETY, 
nature  of,  202  note. 

MUTUAL  OBLIGATIONS  OF   MEMBERS,  93,  273. 

478 


INDEX 


N. 
NAME, 

of  association,  imitation  may  be  enjoined,  245. 

NATIONAL  BANK, 

power  to  acquire  shares  in  associations,  100. 

NON-PROFIT  ASSOCIATIONS, 
definition  of,  5,  199. 

admission  to  membership  of  farmers'  telephone  line,  204,  211. 
dues  of,  269,  271. 
may  become  partnership,  207. 
action  by  members  for  libel,  203  note. 
sale  of  assets,  rights  of  minority,  206. 
transfer  of  membership,  206. 
withdrawal  of  member,  effect  of,  205. 

NOTICE, 

of  meetings  of  non-profit  associations,  235,  264  note. 
of  dissolution,  actual,  112  note. 

O. 
OBLIGATION, 

payable  out  of  a  particular  fund,  127,  130,  131  note. 

OIL  DRILLING   PROPRIETORS,  10. 

OFFICERS, 

contested  elections,  233. 

powers  of,  directors  dedicating  land,  134  note. 

powers  of,  mining  partnership,  89,  90,  92  note. 

powers  of,  non- trading  firm,  90. 

proof  of  election  of,  91. 

removal  of,  by  vote  of  shareholders,  88  note. 

tenure  of,  when  no  rules,  236  note. 

See  Agent;  Trustees. 


P. 

PARTIES, 

necessity  of  joining  beneficiaries,  160,  164,  243. 
to  winding  up,  122. 

PARTITION, 

right  of  member  of  non-profit  association,  273. 
shareholder's  right  to,  32. 

PARTNERSHIP, 

association  for  profit  held,  36  note,  38,  40,  100,  114,  120  note. 

PARTNERSHIPS, 

distinction  between  partnership  and  association,  3. 

479 


INDEX 

PARTNERSHIPS  —  Continued. 

distinction  between  partnership  and  trust,  40. 

distinguished  from  corporation,  101. 

dividing  product  in  specie,  69. 

fraternal  insurance  orders,  37. 

in  use  of  property,  67. 

property,  nature  of  partner's  interest  in,  78. 

See  Joint  Stock  Associations;   Limited  Partnership. 

PARTNERSHIP  ASSOCIATIONS   LIMITED, 
liabiUty  of  members,  24. 
in  Michigan,  nature  of,  23,  24. 

See   Joint    Stock  Associations;    Limited  Partnership  Asso- 
ciations. 

PENALTIES, 

for  violation  of  rules,  237  note. 

PERPETUITIES, 

associations  organized  under  deed  of  trust,  29. 

non-profit  associations,  33. 

avoidance  of,  34. 

no  right  of  partition,  121  note. 

PERSONAL  PROPERTY, 

of  non-profit  association,  title  to,  249-252. 

PEWHOLDERS, 

status  of,  209  note,  246. 

PLEDGE, 

of  shares,  nature  of  title,  81  note. 

POOLS,  11,  134  note,  187-190,  198. 

POWERS, 

of  members  of  associations  for  profit,  88. 

of  members  to  bind  other  members,  92. 

of  officers,  non-trading  firm,  90. 

of  officers  of  mining  partnership,  89,  90,  92  note. 

PREFERENCES, 

by  trustee  after  estate  insolvent,  160. 

PRESCRIPTION, 

rights  of  associations  acquired  by,  over  land  of  a  member,  88. 

PRINCIPAL  AND   INCOME, 

apportionment  of  dividends  between  life  tenant  and  remainderman, 
1.5  note,  80  TLole,  81  note,  120  note. 

PROFESSIONAL  ASSOCIATIONS, 
nature  of,  5,  202. 

PROMISSORY   NOTE, 

of  treasurer  of  association  for  profit,  88  note. 

480 


INDEX 

PROMOTERS, 

of  corporations,  27. 

PROPERTY, 

distribution  of,  to  members  of  clubs,  212. 

of  non-profit  associations,  title  to,  220,  239. 

of  non-profit  association,  effect  of  incorporation  on  title,  244,  245. 

of  religious  associations,  254-269. 

real  estate,  conveyance  to  association  in  firm  name,  88. 

real  estate,  nature  of  partner's  interest  in,  79. 

right  of  member  to  partition,  273. 

right  of  possession,  249  note. 

schism  in  church,  230  note. 

title,  socialistic  community,  253,  254. 

PROPERTY   RIGHTS, 

effect  of  on  interference  by  civil  courts,  233. 

minister's  salary,  228  note,  229  note. 

of  retiring  member  of  non-profit  association,  250,  253  note,  254  note, 

261. 
of  shareholders,  78. 
of  shareholders  in  leasehold,  102. 

PROPRIETORSHIP, 

of  business  by  partners,  57. 

PROSPECTING, 

or  "grub  stake  "  contract  not  partnership,  69. 


QUASI   PARTNERS,  188. 


R. 
RATIFICATION, 

from  purposes  of  association,  279. 

of  acts  of  officers  and  agents,  277,  278. 

REAL  ESTATE, 

conveyance  to  association  in  firm  name,  88. 

of  partnership,  nature  of  partner's  interest  in,  79. 
See  Property. 
RECEIVERS, 

of  associations  for  profit,  97,  106  note. 

REINSTATEMENT, 

of  members  of  non-profit  associations,  221, 

REGULATIONS, 

of  associations  for  profit,  92. 
of  non-profit  associations,  232. 

REGULATION 

of  associations,  Interstate  Commerce  Act,  140. 

481 


INDEX 

RELIGIOUS  ASSOCIATIONS, 
consolidation  of,  256-267. 
{ii%'ision  of,  26S. 
nature  of,  5,  200. 
property  of,  254. 

REMOVAL   OF  TRUSTEES, 

effect  of,  on  nature  of  organization,  49. 

REPRESENTATR'E 

proceedings  in  equit}-,  95. 

RESERVOIR   PROPRLETORS,  193  note. 

RESTR.\INTS   ON  ALIENATION, 

associations  organized  under  deed  of  trust,  29. 

RETIRED   MEMBER, 

of  non-profit  association,  property  rights  of,  250,  253  ncie,  254 
note,  261. 

RETIRED   PARTN'ER, 

liability  of,  89  note,  111  TWie. 


S. 
S.\LE, 

by  club  to  members,  251,  252. 

of  shares  in  joint  stock  association,  IS  note. 

SECRET   PROFITS, 
by  shareholders.  94. 
by  trustee,  134,  160. 
of  sjTidicates,  134  note,  183  note. 

SERVICE   OF   PROCESS, 
on  associations,  15  note,  96. 

SH.\REHOLDERS, 
actions  by,  111. 

bill  against  trustees,  some  of  whom  are  out  of  jurisdiction,  137. 
bill  for  winding  up,  109  note. 
certificates,  nature  of,  106. 
dividends.    Se^  Dividends. 
dormant  partners,  110. 
executor's  liability,  119. 
interest,  real  or  personal,  33,  87. 

property  rights  of,  in  real  estate  of  association,  120  note. 
liabihty  of.    See  Liability'. 
limitation  of  liabihty  of,  123,  131. 

limitation  of  liabihty,  binding  as  between  themselves.  126. 
limitation  of  habihty  of,  form,  35. 
limitation  of  Uabihty,  effect  of  notice,  124-129. 
liabihty,  notice  of  limitation  from  nature  of  organization,  129. 
limitation  of  liabihty  by  express  stipulation,  129-131. 
482 


INDEX 

SHAREHOLDERS  —  Continued. 

in  joint  stock  associations,  liability  of,  17. 

liability  of,  when  some  absent  or  insolvent,  122. 

nature  of  interest  of,  87. 

powers  of,  120  note. 

power  to  bind  others,  120  note. 

power  to  control  trustees  of  associations  for  profit,  47,  48,  49,  51,  56. 

power  to  instruct  trustees,  effect  of,  85,  120  note. 

power  to  remove  trustees,  effect  of,  85. 

power  to  terminate  trust,  effect  of,  49,  85. 

property  rights.    See  Property. 

rights  and  liabilities  of,  98. 

right  to  accounting,  106. 

right  to  compel  performance  of  trust,  133. 

right  to  contribution,  122  note. 

right  to  examine  books  of  joint  stock  association,  14  note. 

right  to  exoneration,  122  note. 

right  to  partition,  32. 

right  to  possession  of  property,  133. 

SHARES, 

issue  of,  137. 

in  joint  stock  association,  property  rights,  3  note. 

limited  voting  rights,  joint  stock  associations,  18  note. 

in  associations  as  investments,  138. 

in  associations  as  property.  See  Inheritance  Tax;  Joint  Stock 
Associations;  Property  Rights  of  Shareholders;  Tax- 
ation. 

forfeiture  and  redemption  of,  105. 

SHARES,    TRANSFER   OF.    See  Transfer  of  Shares. 

SHIPS, 

owners  tenants  in  common,  192. 

SOCIAL   CLUB, 

nature  of,  5,  200. 

SOCIALISTIC   COMMUNITIES, 
nature  of,  5,  9,  202. 
held  partnerships,  36  note. 
property  rights  of  members,  252. 

STATUTORY  JOINT  STOCK  ASSOCIATIONS.  See  Joint  Stock 
Associations;  Limited  Partnership  Associations;  Part- 
nership Associations  Limited. 

STOCK   EXCHANGE, 
nature  of,  5,  199,  210. 
"seats,"  transfer  of,  210. 

STOCK   TRANSFER  TAX,  142,  143. 

STRIKES, 

justification  of,  286. 

liabihty  of  members  of  trade  unions  for  damages,  285. 

483 


INDEX 

SUBSCRIPTIONS, 

to  shares,  liabilitj^  for,  105. 
enforcement  of,  104,  270. 

SUITS, 

by  members  against  association,  duty  to  seek  relief  first  within,  106. 

SYNDICATES,  5,  11,  136,  150,  182. 
agreements,  114. 
as  partnerships,  11  note. 
as  trusts,  12,  185. 

fiduciary'  obligation  of  members,  183  note. 
Uabihty  of  members,  184  7io(e. 
managers,  liabihty  on  contracts,  183. 
powers  of  managers,  184  note. 
powers  of  members  of,  183. 
right  to  change  membership  of,  183. 
secret  profits,  134  note,  183  note. 

T. 

TAXATION, 

of  associations.  Federal  Income  Tax,  140. 
of  associations.  Federal  Corporation  Tax,  139. 
of  shares  in  associations,  82,  141,  142. 
of  transfers  of  shares,  142,  143. 

TEMPORARY   PUBLIC   ORGANIZATIONS, 
nature  of,  5,  202. 

TENANTS   IN   COMMON,  5,  192. 

distinguished  from  mining  partners,  68. 

distinguished  from  partnership,  192,  200  note. 

office  building,  70. 

action  of  majority,  197. 

duty  to  repair,  197. 

fiduciary  obhgation,  195,  196. 

right  to  possession,  194. 

waste  by,  192  note,  194. 

TRANSFER  OF  SIL\RES,  107,  108,  109 

right  to  transfer,  87. 

not  illegal,  114. 
•       new  firm,  imphed  assumption  of  debts,  112  note. 

liability  of  transferee  for  obhgation  of  transferor,  108. 

TRADE  UNIONS, 

nature  of,  202. 

contract  of  national  association  part  of  individual  contract  of 

member  of  local,  282. 
liability  of  niernbers  of,  285. 

TRIBUNALS, 

of  unincorporated  association,  227. 

of  association,  jurisdiction  of,  229,  267. 

484 


INDEX 

TRUSTEE, 

appointment  of  agents  by,  167. 

as  beneficiary,  162. 

as  managing  agent  of  shareholders,  45. 

actions  at  law  against,  by  beneficiaries,  136. 

buying  at  foreclosure  sale,  161. 

certification  of  bonds,  161. 

change  of,  169. 

compensation  of,  164. 

control  of,  by  shareholders,  61. 

control  of,  power  to  amend  declaration  of  trust,  58,  64. 

control  of,  power  to  elect,  48,  51,  64. 

control  of,  power  to  remove  without  cause,  58. 

control  of,  power  to  terminate  trust,  64. 

delegation  of  duties,  135,  166,  167. 

distinguished  from  agent,  75. 

doing  business  in  other  states,  168. 

duty  of  good  faith,  160. 

election  of,  48,  51,  64. 

express  exemption  from  liability,  161. 

following  will  of  majority  of  beneficiaries,  166. 

indemnity  of,  166. 

liabilities  of.    See  Beneficiary. 

liability  to  creditors,  156. 

liabihty  for  torts,  156. 

liability  for  co-trustee's  acts,  162. 

management  of  trust  estate,  167. 

mutual  obligations  of  trustee  and  beneficiary,  160. 

not  shareholder  conducts  business,  74. 

negligence  of,  135,  161,  162. 

presumed  member,  136  note. 

proper  plaintiff  in  suit  to  protect  trust  estate,  160,  164,  243. 

purchase  from  shareholder,  135  note. 

removal  of,  169. 

right  against  beneficiary  for  indemnity,  163,  277. 

right  to  instructions  by  court,  168. 

secret  profits  by,  134,  160. 

stipulation  hmiting  Uabihty  of,  157. 

substitution  of,  170. 

of  associations  for  profit,  133. 

action  by  majority,  135. 

act  jointly,  167. 

liabiUty  joint,  several,  157. 

See  Benepiciaky;  Cestui  que  trust;  Shareholder. 

TRUSTS,  4,  149. 

distinguished  from  partnerships,  40. 

for  bondholders,  153. 

for  charity,  247. 

for  creditors,  151. 

for  unincorporated  associations,  240. 

for  religious  associations,  effect  of  schism,  256. 

485 


INDEX 

TRUSTS,  —  Continued. 

for  association,  enforcement  of,  by  beneficiary,  241. 

property,  conveyance  of,  244. 

rights  of  creditors,  15.5-15S. 

under  wills  to  carrj'  on  business,  150. 

■what  law  governs  construction  of  deed,  149  7wte. 

with  transferable  shares,  42. 

without  association  of  shareholders,  44. 


U. 

ULTRA    VIRES,  18  note,  23  note,  91,  93,  238,  240,  260  note,  267. 

rXASSOCIATED   GROUPS,  4,  170. 

UXDER^^TIITERS   OF   SECURITIES,  5,  150,  1S2. 

UNIFORM   P.IRTXERSHIP   ACT,  144-148. 

UXIXCORPORATED   COMPAXIES, 
under  the  Bankruptcy  Act,  62. 

V. 

^T:XTURE.    See  Joint  Xd^-t.^tcre. 

VOLUNTARY  ASSOCLITIOXS,    1. 

VOTIXG   TRUSTEE, 
duties  of,  161.  162. 


VOTIXG   TRUSTS,  154. 


W. 


^TXDIXG   UP, 

informal  associations  for  profit,  120,  122. 
of  mining  partnership,  122  ?wte. 
of  non-profit  associations,  273. 

See  DissoLCTiox;   Receivers. 

WITHDRAWAL, 

of  members  of  non-profit  association,  209  note. 


486 


LAW  LIBRARY 
I/IS    AN(yKLKS 


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